The Energy Department began buying crude oil to refill the Strategic Petroleum Reserve in May 2023, after drawing about 200 million barrels or more from the reserve since the end of 2021 to tamp down spiraling oil prices caused by supply outages.
The Energy Department’s last announced purchase for the so-called SPR was at the end of February this year, when it said it bought 3.25 million barrels to be delivered through August.
Now, the department says it had shelved its intent to acquire 3 million barrels for the SPR site in Bayou Choctaw, Louisiana. The intent to buy was announced in mid-March, with delivery scheduled through September.
“We will not award the current solicitations for the Bayou Choctaw SPR site and will solicit available capacity as market conditions allow,” the department was quoted saying by Bloomberg.
Given the current state of oil prices, the department indicated that it will adopt a wait-and-see stance on refilling the SPR. “We will continue to monitor market dynamics,” the release added.
The department will likely remain in that situation until oil markets begin easing from their present highs, said Phil Flynn, an energy analyst at Chicago's Price Futures Group.
With both WTI and Brent advancing towards $90, the Biden administration, which has canceled some high-profile oil drilling projects in the United States, "may have to cancel something else," Flynn, the Price Futures analyst said, referring to the SPR,
In prior SPR purchase announcements, the Energy Department often touted its ability to get a “good deal” for US taxpayers.
For instance, with the 3.25 million-barrel purchase it announced on February 28, the department said the average of $77.43 it paid for a barrel was “well below” $95 per barrel average it got for selling SPR crude in 2022 at the height of an oil price rally then.
To the department’s and the administration’s credit, the sale of some 200 million barrels from the SPR succeeded in tamping the market price of crude down from more than $100 at one point in mid-2022 to just above $70 six months later.
Biden, in his defense, had said he was only acting to reduce record high pump prices of fuel, which stood at above $5 per gallon in June 2022 and has stabilized since at below $3.50. The administration had also blamed high crude oil prices for US inflation getting to four-decade highs of above 9% in June 2022.