US preparing to start SPR refill purchases

  • Market: Crude oil
  • 02/03/23

The US Department of Energy is preparing to start purchasing crude oil to partially refill the Strategic Petroleum Reserve (SPR) after it sold 180mn bl last year in response to the war in Ukraine.

"We would like to start buying within the next year, depending on the window of opportunity," said Christopher Roark, senior crude oil marketing analyst at the US Department of Energy, speaking at a meeting of the Crude Oil Quality Association.

Even though the US government is "not the fastest at things," the department could "react quickly to the market" through a competitive solicitation process to buy oil, Roark said.

"Looking at the market situation, not only do we want to get the best value for taxpayers, we also don't want to impact the markets," he said.

The government could buy 40mn-60mn bls of crude for the reserve, depending on market conditions, Roark said. The purchase amount will be dictated by the roughly $4.5bn that the government generated from selling 180mn bl from the SPR in response to the Ukraine war, he said. The department would limit light, sweet crude purchases to about 20mn bl, and the rest would likely be comprised of sour supply, he said.

Logistical considerations will also dictate how the SPR refill proceeds, Roark said. The SPR has a drawdown rate of 4.2mn b/d, while its fill rate is about 685,000 b/d. "We were designed to get the oil out quickly, not necessarily to get it in quickly," he said.

The department must also schedule refill plans around ongoing maintenance at its underground storage facilities in Texas and Louisiana. The department's Bayou Choctaw storage site in Louisiana is offline for maintenance, with similar work planned for other facilities, Roark said.

"We are trying to time our fill program around the maintenance," Roark said. "Just like a refinery turnaround there might be some slippage, so we are cautious about that."

The Biden administration has said it wants to finish congressionally mandated crude drawdowns before refilling the SPR. The last mandatory crude sale until fiscal year 2027, for the sale of up to 26mn bl of sweet crude, will finish withdrawals by 30 April for the Big Hill SPR facility in Texas and by 30 June for the West Hackberry SPR facility in Texas.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
30/05/24

ExxonMobil's Nigeria sale inches forwards

ExxonMobil's Nigeria sale inches forwards

Lagos, 30 May (Argus) — ExxonMobil's long-delayed sale of its Nigerian shallow-water oil and gas business to London-listed Seplat is one step closer, with the US major having agreed a settlement with state-owned NNPC that removes a legal obstacle to a regulatory review of the deal. Exxon agreed the $1.58bn divestment, for its 40pc stake in more than 90 shallow-water and onshore platforms, in February 2022. The assets generate around 95,000 b/d of oil equivalent (boe/d). Completion has been delayed by a dispute over pre-emption rights provided for in an NNPC-Exxon joint operating agreement, and the state-owned firm got a court injunction blocking the deal in July 2022. Ministerial approval, appearing to ignore the court injunction, was first granted and then withdrawn in August 2022. Nigerian upstream regulator NUPRC said at the start of May that Exxon and NNPC would have to reach a settlement before a review could be conducted or any recommendation for its approval submitted to the petroleum minister. Before recommending any deal for ministerial approval, the regulator said it has to determine if intending buyers have the financial resources and technical expertise to manage their acquisition targets, and whether sellers or buyers will be responsible for environmental remediation, host community obligations and decommissioning liabilities. NUPRC also said the government had set 31 August as a deadline to clear Nigeria's backlog of unapproved upstream deals. NNPC did not reveal the terms of today's settlement, which comes after Nigeria's president Bola Tinubu, who doubles as petroleum minister, and his two junior petroleum ministers met ExxonMobil upstream president Liam Mallon and its Nigerian business' managing director Shane Harris on 28 May. "[The] president has given a clear directive to [NNPC's chief executive Mele Kyari] and I to resolve the issue of divestment, and we are doing whatever we can to achieve that", junior minister Heineken Lokpobiri said at the meeting. By Adebiyi Olusolape Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

E3 seeks IAEA action against Iranian nuclear activity


30/05/24
News
30/05/24

E3 seeks IAEA action against Iranian nuclear activity

Dubai, 30 May (Argus) — The E3 group — a diplomatic coalition comprising France, the UK and Germany — has prepared a draft resolution against Iran for the UN's nuclear watchdog the IAEA to consider at its board of governors meeting next week. The draft focuses on a probe into two previously undeclared nuclear sites in Iran and suggests the possibility that IAEA chief Rafael Grossi might provide a more "comprehensive report" on Tehran's nuclear activities than his regular quarterly ones. But it stops short of asking the IAEA to refer Iran to the UN Security Council for non-compliance, a diplomatic source with knowledge of the matter told Argus . "The E3 has prepared a draft resolution and circulated it, despite opposition by the US," the source said. "They have also begun negotiations with other members of the board of governors to ensure the largest number of votes… which will give the adopted resolution weight." The draft builds on three previous resolutions against Iran "but will stop short of a very important step — referring the issue to the UN Security Council as a situation of non-compliance, which would require an intervention," the source said. Since June 2020, the IAEA's board of governors has adopted three resolutions against Iran in response to insufficient co-operation on outstanding issues relating to its legal obligations under its Non-Proliferation Treaty (NPT) Safeguards Agreement. The board of governors will convene on 3 June for a week-long meeting, where "the draft resolution is surely going for a vote," the source said, an indication that unanimity among the 35 board members is unlikely. The US is keen to manage tensions with Tehran at a highly sensitive time for the country following the death of its president and foreign minister in a helicopter crash earlier this month. An editorial published by Iran's state news agency Irna on 29 May suggests Washington's concerns may not be unfounded. "As per previous experience, if a resolution is issued against Iran, Tehran will react to it and take countermeasures," the editorial said. Iran responded to two previous IAEA resolutions in June and November 2022 by removing more than 20 IAEA surveillance cameras at its nuclear facilities, and starting the production of 60pc enriched uranium at its Fordow nuclear site. "Based on history, issuing this resolution will be more detrimental to those issuing it than to Iran," Irna said. Building blocks "What is happening right now is the process of accumulation of resolutions, so that when the day comes and the IAEA makes a referral to the UN Security Council, there will be enough resolutions to make a case for action at the security council level," the source noted. Concerns among western officials over Iran's nuclear activity have been mounting since Tehran began breaching restrictions in 2019 in response to former US president Donald Trump's decision to pull Washington out of a 2015 nuclear deal between Iran and a group of world powers. Iran is enriching uranium to up to 60pc purity, according to the IAEA. Near 90pc is considered to be weapons grade. By Bachar Halabi and Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Nuevo gobierno de México enfrentará panorama difícil


29/05/24
News
29/05/24

Nuevo gobierno de México enfrentará panorama difícil

Mexico City, 29 May (Argus) — El nuevo gobierno de México, que asumirá el cargo en octubre, se enfrentará al peor escenario fiscal para un nuevo presidente en décadas, lo que añadirá presión al sector energético. La candidata presidencial Claudia Sheinbaum tiene una sólida ventaja sobre su contendiente Xóchitl Gálvez a escasos días de las elecciones del 2 de junio, de acuerdo a las últimas encuestas. Pero independientemente de la candidata que gane las elecciones, el gobierno entrante se enfrenta a un espiral deficitario que puede requerir recortes profundos y posponer los proyectos prometidos en la campaña. Carlos Ramírez, antiguo jefe del fondo de pensiones Consar de México y actual director de políticas públicas y asesoría de riesgos políticos de Integralia, dijo que el escenario más probable es el de pragmatismo forzado. En caso de ganar, Sheinbaum tendrá oposición continua, pues las proyecciones indican que la oposición asegurará suficientes escaños en ambas cámaras para evitar que el partido Morena obtenga mayorías calificadas, de acuerdo con Ramirez. El déficit federal alcanzó los Ps452,000 millones ($27 mil millones) en el primer trimestre de 2024, más del triple que en el primer trimestre de 2023, entre el gasto preelectoral y la prisa por completar los proyectos insignia del presidente mexicano Andrés Manuel López Obrador: la refinería de Olmeca en Dos Bocas, el corredor interoceánico de Tehuantepec y el Tren Maya de 1,554km. Si se anualiza, el déficit podría alcanzar 6pc del PIB, un nivel nunca visto desde 1988, dijo el Instituto Mexicano de Ejecutivos Financieros (IMEF). "Viendo cuánto se gastó en estos proyectos en el primer trimestre, sabemos que esto no fue suficiente [para completarlos]", dijo Víctor Herrera, jefe de estudios económicos del IMEF. Añadió que el déficit será difícil de reducir rápidamente, y llevarlo a un nivel "prudente" de alrededor de 3 puntos del PIB significaría no solo no terminar los proyectos de infraestructura este año, sino también encontrar recortes de Ps1,000 millones en el presupuesto de 2024. Herrera dijo que el IMEF prevé que el déficit 2024 alcance los 5 puntos porcentuales del PIB probablemente, una cifra reflejada la semana pasada por la agencia de calificación Moody's. Sheinbaum "no abandonará Dos Bocas, el Corredor o el Tren Maya", dijo Ramirez, añadiendo que esto solo sumará presión a Sheinbaum para retrasar su propia agenda, principalmente dirigiéndose a los cuellos de botella de energía e infraestructura para la atracción de inversión al país. También ha detallado su plan por $13 mil millones en inversiones para proyectos de energía limpia. Pero al financiar sus proyectos, dijo Moody's, la trayectoria del crédito soberano de México depende de la capacidad de la próxima administración para ejecutar la consolidación fiscal y evitar un mayor deterioro. La cuestión de Pemex Las perspectivas de financiación podrían empeorar si el gobierno continúa ofreciendo apoyo extraordinario a la empresa estatal Pemex sin modificar el modelo de negocio hacia la rentabilidad, una perspectiva compartida por Ramirez, el IMEF y Moody's. "Aunque esperamos que el próximo gobierno continúe apoyando a [Pemex], la estrategia empresarial actual de la compañía estatal de petróleo ha aumentado sus riesgos crediticios", dijo la agencia. Y mientras que Sheinbaum y la candidata de la oposición Gálvez están de acuerdo en la importancia de la transición a las energías renovables, "Sheinbaum probablemente seguirá expandiendo el negocio de refinerías, lo que traerá mayores pérdidas." Moody's dijo que el próximo gobierno también tendrá menos capital político que la administración actual, "permitiendo que la gobernanza y los riesgos sociales se vuelvan más destacados", añadió Moody's, aunque Sheinbaum tenga el apoyo continuo de López Obrador. "Esperamos que mantenga en gran medida el modelo de negocio existente para Pemex, haciendo hincapié en la soberanía energética, aunque ha declarado la necesidad de una estrategia de transición energética", afirmó Moody's. Dicho esto, "México se está quedando atrás en sus planes de transición hacia las energías limpias después de años de baja inversión", añadió Moody's. Sin embargo, Sheinbaum busca continuar apoyando a la empresa eléctrica estatal CFE como la fuerza dominante en el sector de la energía eléctrica. México va en camino para no alcanzar sus objetivos de energía limpia, y los cortes de energía se han vuelto más frecuentes, lo cual es atractivo para los inversores. Por James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Rising Guyana-USG crude flows benefit Suezmaxes


29/05/24
News
29/05/24

Rising Guyana-USG crude flows benefit Suezmaxes

Houston, 29 May (Argus) — Surging Guyanese crude exports to the US Gulf coast may benefit Suezmax crude tankers as a potential new export market develops for the South American country's booming production. Citgo's 167,500 b/d Corpus Christi refinery in Texas has taken three 1mn bl cargoes of medium sweet Payara Gold in May, with a fourth Suezmax, the Nordic Hawk , transiting the Corpus Christi ship channel on 29 May, according to ship tracking data from Kpler. If the Nordic Hawk and the Aframax onto which it lightered discharge by the end of the month, the refinery's imports of Payara Gold would top 100,000 b/d in May, up from 60,000 b/d in April and 32,000 b/d in March, according to Kpler. US Gulf coast refiners last year imported just two Suezmax-size cargoes of Guyanese crude, or about 5,500 b/d. The primary destinations for the country's roughly 370,000 b/d of oil exports last year, about 85pc of which were hauled on Suezmaxes, were Europe, which took about 60pc, and the US west coast, which took about 25pc via re-export on the Trans-Panama pipeline, according to Vortexa data. A new market to the US Gulf coast would add to already-rising Suezmax demand in Guyana, where tonne-miles this year through 20 May increased by 45pc from the same period last year and by almost fivefold from the same period in 2022, Vortexa data show. Charterers moving Guyanese crude often opt for the economies of scale offered by 1mn bl Suezmaxes compared with smaller 700,000 bl Aframaxes. The start of production at the 220,000 b/d Prosperity floating production, storage, and offloading vessel (FPSO) in November 2023 helped boost Guyana's oil production to 625,000 b/d in April , according to government data. Output in April exceeded the country's rated capacity by 65,000 b/d following improvements at the older Liza 1 and Liza 2 projects in the deepwater Stabroek block. Mexican substitute? Increased US Gulf coast imports of Guyanese crude come as crude imports from Mexico fall, exerting downward pressure on rates for Aframaxes since March. US Gulf coast imports of Mexico's medium sour Isthmus have led the declines, falling to about 135,000 b/d from 1 March through 27 May compared with about 220,000 b/d over the preceding three-month period, according to Vortexa data. "Given the expectation of depressed Mexican crude exports going forward, the push and pull for Guyanese barrels between the US and Europe is likely to be stronger than ever," Kpler analyst Matt Smith wrote in a research note. By Tray Swanson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Venezuela veers further from election vows


29/05/24
News
29/05/24

Venezuela veers further from election vows

Caracas, 29 May (Argus) — Venezuela's government will no longer allow EU observers to witness the presidential election set for 28 July, a step that could provide a pretext for Washington to further tighten its sanctions against the country. The government had previously informally invited the observers, but rescinded the invitation hours after the Unity Platform opposition coalition urged President Nicolas Maduro to send a formal request. Venezuela's government has continued to block the opposition's top candidate , Maria Corina Machado, from running. Venezuela will block the observers because of the EU's "colonialist practices" of economic sanctions, CNE head Elvis Amoroso said. The sanctions have cost Venezuela more than $125bn in frozen assets and lost revenue, he added. Europe along with countries including the US, Canada, Panama and Switzerland have sanctioned Venezuela since 2018, after accusing Maduro of rigging that year's presidential election. US president Joe Biden's administration last month reimposed most oil sanctions against Venezuela, citing the Maduro government's refusal to allow Machado to run for president. The US administration said it would impose additional restrictions if it determines that the 28 July election that it was not free — a determination that takes into account whether credible international observers are allowed to monitor the voting process. Both the opposition coalition and the EU called for Venezuela to reconsider. The EU reminded Venezuela that allowing observers was part of the deal struck between Maduro's representatives in Barbados in October and the opposition coalition. The agreement aimed to ensure a path to free and fair elections, after which the US lifted oil sanctions for six months. Maduro's latest move follows a pattern of intimidation and opacity designed to ensure his continuity, critics said. The blocking of observers "is regrettable but not surprising," said R. Evan Ellis, a research professor of Latin American studies at the US Army War College. Venezuela had allowed an EU mission to observe 2021 state and municipal elections, which it condemned as unfair and undemocratic. Maduro and allies claimed a landslide win at both state and city levels. Polls in Caracas have Maduro losing in July by widening margins. Maduro was in second place with about 20pc of voter support for several weeks, but pollster Meganalisis said he would only get around 9pc of the vote if it were held this week. Machado's place-holder candidate Edmundo Gonzalez would win with 60pc of the vote, according to the poll. By Carlos Camacho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more