The price of U.S. WTI crude oil has stabilized in the low $70s per barrel for a considerable duration, enabling the Biden Administration to increase the replenishment of the Strategic Petroleum Reserve (SPR), as previously indicated would occur at prices of $79 per barrel or lower.

As of Tuesday morning, WTI crude is priced at $70 per barrel, having recently fluctuated below this level. However, the Energy Department reportedly has only $841 million remaining for crude purchases for the SPR, according to a Tuesday report from Bloomberg. This amount would allow for the acquisition of approximately 12 million barrels of crude at current prices, based on Bloomberg’s calculations. This figure represents a minimal contribution, given that the SPR is currently just over half full, with a total capacity of 714 million barrels.

The Department of Energy’s Office of Petroleum Reserves has recently issued a request for bids to supply up to 1.5 million barrels of oil to the Bayou Choctaw facility in January 2025. An additional solicitation is scheduled for August 12, 2024, for another 2 million barrels intended for the Bryan Mound site, also for delivery in January 2025. This replenishment initiative follows the SPR’s essential function in stabilizing the market amid global supply disruptions, particularly the release of over 180 million barrels of oil from the SPR beginning in 2021, during a period of elevated gasoline prices. The US Department of Treasury asserts that these releases, in conjunction with coordinated international actions, contributed to a reduction in gasoline prices by as much as 40 cents per gallon in 2022. Currently, the SPR contains 375 million barrels of crude, which is 263 million barrels less than the amount stored at the start of President Joe Biden’s administration. The SPR, designed to hold up to 714 million barrels of crude oil, is located in underground salt caverns across four sites in Texas and Louisiana, serving to safeguard the economy and American livelihoods during periods of oil shortages.

Bryan Mound – Bloomberg – SPR Storage Site

Author: Dr. Arsham Ghasemi