US President Joe Biden’s administration intends to buy back more than 12 million barrels to fill the strategic oil reserve, which recorded a noticeable decline after Washington released millions of barrels last year to counter the sharp rise in oil prices against the backdrop of the Russian-Ukrainian war.
The Biden administration aims to buy back at least 12 million barrels of oil to support its emergency reserves during 2023, including 6 million barrels previously announced.
Washington is slowly buying back to fill the strategic oil reserves after selling more than 200 million barrels last year, including the sale of 180 million barrels, to fight the rise in oil prices after the Russian invasion of Ukraine.
America’s emergency stocks
Sales from the Strategic Petroleum Reserve have pushed levels in emergency stocks to their lowest level since 1983.
Last Friday, the Energy Department said that 5 companies, including Exxon Mobil, sold 3.1 million barrels to the Strategic Petroleum Reserve for delivery in August.
The administration announced a new order to buy 3 million barrels for delivery in September, according to data seen by the specialized energy platform.
A spokesman for the Ministry of Energy: The administration “will continue to look for opportunities for additional repurchase operations, as market conditions allow and the restrictions imposed on operations of the Strategic Petroleum Reserve,” according to Reuters news agency.
The United States began building the Strategic Petroleum Reserve in the 1970s; To limit the effects of unexpected cuts in oil supplies, especially after the oil boycott that the country was subjected to in 1973, by the Arab countries, in the aftermath of the October War.
And America designed the strategic reserve to absorb about 714 million barrels of crude oil through 4 storage sites along the Gulf of Mexico, where the majority of American refining capacity is located.
One of the primary functions of the SPR is to hold sufficient stocks to meet US commitments under the International Energy Agency’s 1974 program.
Two of the four storage sites in Louisiana and Texas are expected to remain under maintenance through late this year, limiting buybacks.
Political struggle over oil reserves
Although the United States is less dependent on oil imports than it was in 1983, the low level of the strategic oil reserve has been the focus of attention of Republicans, who say that Democratic President Joe Biden has endangered energy security, as the reserve is currently about 351.7 million barrel.
Sales from reserves have also become a sore point in relations with Saudi Arabia, which is working with countries + to reduce production to control markets, which Washington sees as a major reason for the price hike.
The Biden administration said it paid an average price of $73 a barrel for August delivery of oil, compared to the average $95 a barrel of crude it sold last year.
Earlier this year, the US Department of Energy announced its plan to replenish the strategic oil reserves, and linked this to the drop in oil prices from West Texas Intermediate crude at – or below – a level ranging between 67 and 72 dollars per barrel.
Oil prices
Dealers in the oil markets are watching the scene closely, while the US government begins to refill emergency stocks, as its purchases will lead to pressure on the available supplies in the market.
An increase in oil consumption within the United States could lead to a rise in oil prices, which in turn could lead to higher gasoline prices in the middle of the summer driving season, and this may discourage the Biden administration from replenishing the Strategic Petroleum Reserve in larger quantities.
West Texas Intermediate crude settled at $69.42 a barrel on Tuesday, up 3.4% on hopes of increasing fuel demand in China, after the central bank cut its short-term lending rate for the first time in 10 months.
Washington-based advisory firm Clear View Energy Partners wrote in a note to clients on Friday: “The US Department of Energy appears to be looking to replenish reserves in a series of small rather than large purchases to reduce upward pressure on crude oil in the summer driving season.” and presidential election season.
Leave a Reply