US preparing to start SPR refill purchases

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.

By Chris Baltimore