US withdraws purchase of 6 million barrels of oil for emergency reserve

Inspenet, August 6, 2023.

The United States Department of Energy has decided to cancel an offer to purchase 6 million barrels of oil for the Strategic Petroleum Reserve. This decision was made in light of expectations that oil prices will continue to increase due to a cut in production by Saudi Arabia.

On July 7, the United States had made the last request to buy sour crude destined for the SPR. It is worth mentioning that last year, the administration released a record 180 million barrels from the reserve to stabilize prices after the Russian invasion of Ukraine and in recent months, the Department of Energy has repurchased 6.3 million barrels.

The reason for not acquiring barrels of oil

The decision not to acquire the 6 million barrels of oil for the Strategic Petroleum Reserve (SPR) was not a rejection of the offers from the oil companies , but a measure taken based on “market conditions”, according to a report spokesman. Although the exact meaning of these conditions was not specified, a shortage of oil supply is observed, which has resulted in an increase in global oil prices, exceeding 80 dollars per barrel in recent weeks.

Oil prices are expected to continue rising in the coming months due to Saudi Arabia’s production cut of 1 million barrels per day starting in July, as well as other cuts by eight OPEC+ countries announced in April. .

In addition, the American Petroleum Institute reported that crude oil inventories in the United States fell by about 15.4 million barrels during the week ending July 28, sources said.

The Biden administration has indicated its intention to buy back oil for the Strategic Petroleum Reserve (SPR) when prices are in a range of between 67 and 72 dollars per barrel.

The Department of Energy remains committed to its SPR replenishment strategy, which includes direct purchases, returns of oil loaned to companies during events such as hurricanes and other supply interruptions, as well as the cancellation of planned sales where removal is not necessary. of oil. All this is done in coordination with Congress, according to the spokesman.

Record sales last year from the reserve have lowered its oil level to the lowest in about 40 years, even though domestic crude production is now higher.

Source: https://www.reuters.com/markets/commodities/us-pulls-back-offer-buy-6-mln-barrels-oil-emergency-reserve-2023-08-01/