US To Replenish Strategic Petroleum Reserve With 3M-Barrel Buy: How Oil Market Reacted

The Department of Energy has issued a solicitation for sour crude oil as it seeks to purchase up to 3 million barrels of oil for the Strategic Petroleum Reserve (SPR) in continuation of the Biden-Harris Administration's three-part replenishment plan.

The DOE said in a statement that it aims to repurchase crude at a lower price than the average of about $95 per barrel it was sold for in 2022. It also highlighted its intention to purchase more oil later this year.

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A previous attempt to refill the stockpile via a 3 million-barrel purchase was canceled by the Energy Department in January after the agency said offers were either too expensive or didn't meet other specifications, a Bloomberg report stated.

The reserve holds about 360 million barrels of oil at present which is about half of its total capacity, the report added citing Energy Department data.

Price Action: The sour crude grades sought by the Energy Department are already in high demand in the wake of production cuts by OPEC+, according to the report. As a result, oil traders keenly watch out for any possible action from the government in regard to replenishing the SPR.

West Texas Intermediate futures maturing in June were trading 0.31% higher at $71.30 per barrel at the time of writing. The United States Brent Oil Fund BNO closed 1.52% higher on Monday while the Vanguard Energy Index Fund ETF VDE gained 0.69%.

The Energy Department also said it has secured the cancellation of 140 million barrels in congressionally mandated sales scheduled for fiscal years 2024 through 2027.

"This cancellation has already led to significant progress toward replenishment and will allow the SPR to have the same number of barrels in reserve by the end of FY 2027 that it would have had emergency barrels not been sold in 2022," it explained.

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