Corrects which trading days will be used to determine final award
President Joe Biden's administration is preparing to start refilling the US Strategic Petroleum Reserve (SPR) by purchasing up to 3mn bl of sour crude for delivery in August.
The administration on Monday issued a request for proposals to buy US-produced crude through a "firm-fixed-priced contract" that would be delivered to the Big Hill SPR site near Beaumont, Texas, from 1-31 August. The administration said it intends to buy more crude later this year as part of its plan to replenish the SPR, which with 359.6mn bl in inventory is at its lowest level in more than 40 years.
The US Energy Department said it is aiming to purchase crude for the SPR "at a lower price than the average of about $95/bl" from last year's emergency sales of 180mn bl. The administration previously said it was targeting a purchase price of $67-$72/bl, but the agency's attempt last year to buy 3mn bl of crude was canceled after the offers failed to meet the price target.
Last week, US energy secretary Jennifer Granholm said the administration would start refilling the SPR after the completion of a congressionally mandated sale of 26mn bl that is scheduled to be completed by 30 June. The Energy Department is planning to add up to 13mn bl to the SPR by the end of the year through purchases and the scheduled return of long-term loans called exchanges.
The 3mn bl of crude for delivery in August will need to be produced in the US by US producers, according to the request for proposals, and will be awarded on a competitive basis.
The final award price will be based on the average daily settlement of the Nymex WTI prompt-month price over three trading days, starting on the trading day that the award is notified, adjusted for the Argus Mars prompt month weighted average for sour crude, plus an adjustment submitted by bidders. The Big Hill SPR storage site has a maximum receipt capability of 225,000 b/d.
