This July 26 article reviews the status of SPR draws and plans thus far to replenish it. Few are focused on the fact that not only will termination of the SPR release decrease supply numbers by about 6 million bbls per week, but when replenishment begins demand will increase.
It will be interesting to see what fixed prices are bid by producers this fall at which to sell to the U.S. 200 mm bbls (or whatever amount the U.S. ultimately decides beyond the 60 mm initial amount) starting in late 2023/early 2024
US to offer fixed price contracts to refill SPR.
Published date: 26 July 2022
US president Joe Biden's administration plans to offer fixed-priced contracts to refill the Strategic Petroleum Reserve (SPR) after 2023 in a bid to encourage US oil companies to bring more production online.
The Department of Energy, which manages the SPR, is launching a rule-making process this week so that it can buy crude to refill the SPR through a competitive fixed-price bid process for future deliveries. Under the current rule, the department can purchase crude for future delivery, but under an index-based bidding process, with the final crude sale prices adjusted based on index prices close to the time of delivery.
The new method "can provide both certainty to industry that there is stable demand for increased production they're bringing online right now, while also providing certainty to the government that SPR has been replenished in a fair fixed price," a senior administration official said today.
The administration plans to call for bids this autumn for companies to sell it 60mn bl of crude to inject into the SPR, energy secretary Jennifer Granholm said in May. The bids are meant for delivery well after the end of fiscal year 2023 — 30 September 2023 — so as not to strain the current tight markets.
For now, the US continues to draw down strategic stocks at unprecedented rates in a bid to bring down oil prices that started rising last year concurrently with the global rebound from the Covid-19 pandemic. The oil price increased by a third since Russia's invasion of Ukraine began on concern about the security of more than 7mn b/d of Russian crude and product exports.
Biden in March ordered 180mn bl to be released from the SPR in May-October as a "war time bridge" to shore up supplies until domestic producers have time to ramp up production later this year. Of that amount, 125mn bl already has been sold and 70mn bl has been delivered, another official said.
The Department of Energy, as part of the same drawdown, offered another 20mn bl from SPR today. The government agency plans to offer up to 2.8mn bl of sour crude and 17.2mn bl of sweet crude with deliveries from 16 September-21 October.
The upcoming sale will offer up to 7.6mn bl of crude from the Big Hill site in Texas, up to 9.6mn bl of sour crude from the West Hackberry site in Louisiana and up to 2.8mn bl of sour crude from the Bryan Mound SPR site in Texas.
US SPR inventory was 474.5mn bl as of 22 July, down by 119mn bl so far this year.
An analysis by the Treasury Department released today suggests that the drawdown of US strategic reserves, together with similar actions by other IEA members, could have shaved up to 42¢/USG from US retail gasoline prices.
The Biden administration has been keen to take credit for recent declines in US average retail gasoline prices after they hit an all time record, in nominal dollar terms, of $5.01/USG last month. That price averaged $4.33/USG in the week ended 25 July, Energy Information Administration data show.
"The current drop in gas prices remains one of the fastest declines in over a decade," the White House said last week. This week's US retail gasoline average price is still 38pc higher than a year earlier.
SPR Replenishment bids
Re: SPR Replenishment bids
I agree that refilling the SPR is going to be a significant increase in demand starting late 2023 or early 2024. This will prolong high gasoline prices, but all Team Biden thinks about is the upcoming midterm elections.
What people should focus on is the Commercial + SPR crude oil inventory.
See chart: https://www.eia.gov/dnav/pet/hist/LeafH ... TSTUS1&f=W
What people should focus on is the Commercial + SPR crude oil inventory.
See chart: https://www.eia.gov/dnav/pet/hist/LeafH ... TSTUS1&f=W
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: SPR Replenishment bids
I’m willing to bet the Gov’t F’s it up
If I was an Ep I’d ask for $125. What dummy would commit to selling at 80 cpe lpi rei??
Why would you sell it at 80 when you can get 90 now which is artificially depressed by the spr dump
I’m tempted to buy futures for q4 2023
The curve has been flattening as of late
If I was an Ep I’d ask for $125. What dummy would commit to selling at 80 cpe lpi rei??
Why would you sell it at 80 when you can get 90 now which is artificially depressed by the spr dump
I’m tempted to buy futures for q4 2023
The curve has been flattening as of late
Re: SPR Replenishment bids
Biden will be out of office by Jan 2024
Leave it to the next guy to fix the mess and take the budget hit.
Trump wanted to fill it when oil was 30 but all the Democrats had a nutty saying
That he was trying to bail out the oil companies.
Leave it to the next guy to fix the mess and take the budget hit.
Trump wanted to fill it when oil was 30 but all the Democrats had a nutty saying
That he was trying to bail out the oil companies.