US to sell another 10mn bl from SPR

President Joe Biden's administration plans to continue an emergency drawdown of crude from the US Strategic Petroleum Reserve (SPR) into November, with the sale of an additional 10mn bl of sweet crude.

The crude sale is the latest in a series of sales supporting Biden's decision in late March to withdraw 1mn b/d from the SPR over six months as a "wartime bridge" tied to disruptions caused by Russia's invasion of Ukraine. The sale will put the US on track to withdraw 165mn bl of crude out of the 180mn bl that Biden approved earlier this year, the US Energy Department said.

The upcoming sale will offer up to 5mn bl of sweet crude from the Big Hill SPR site in Texas for delivery on 1-30 November. It will also offer up to 5mn bl of sweet crude from the West Hackberry SPR site in Louisiana for delivery on 1-20 November. Bids are due at 11 am ET on 27 September.

The SPR held 427.2mn bl of sweet and sour crude as of 16 September, the lowest volume in nearly four decades. The White House says the drawdown has lowered domestic gasoline prices by up to 38¢/USG and helped ease inflation, but critics say the release of crude from the reserve has been part of a strategy to ease consumers' pain at the pump in the run-up to the midterm elections on 8 November.

"He's using that to keep prices down as much as he can just before the election," former president Donald Trump said at a rally in Ohio on 17 September. "And right after the election, it's going to double up and go higher than anybody ever believed."

Democratic lawmakers up for election in vulnerable seats have been pushing Biden to continue the drawdown from the SPR, which they say will provide price stability for consumers and avoid a potential spike in prices after existing crude sales wind down in late October. US regular grade gasoline prices have dropped about $1.30/USG over the last three months, according to the US Energy Information Administration.

"We urge your administration to commit to releasing additional barrels of oil from the SPR through the end of this year, at a minimum," US representative Jared Golden (D-Maine) and seven other lawmakers in the US House of Representatives wrote to Biden on 16 September.

Since Biden took office, the administration has withdrawn nearly 211mn bl of crude from the SPR. Of that, 55mn bl was sold through mandatory sales required by the US Congress. The other withdrawals have come from the 1mn b/d emergency sales and a temporary loan program that will automatically return more than 20mn bl of crude to the SPR in 2024.

The US Energy Department intends to use the billions of dollars it has collected from the emergency crude sales to buy crude to refill the SPR, potentially through new fixed price contracts. The agency does not expect to begin refilling the SPR until "well into the future" and likely after the upcoming fiscal year ends on 30 September 2023, the White House said last week.

By Chris Knight