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The U.S. Department of Energy wants to buy 6 million barrels of crude oil for the strategic petroleum reserve as part of efforts to refill it after a massive release last year of close to 200 million barrels.
The release was a partially successful attempt to bring retail fuel prices down following Russia’s invasion of Ukraine, which at the time some warned would empty the strategic petroleum reserve at a time when it was better full.
This year, the Department of Energy has repeatedly said it wanted to start refilling the SPR but the price never seemed right, after the department set itself a range of between $68 and $72 per barrel for the refill push.
Even when prices did decline to the lower $70s earlier this year, the Department of Energy bought only a few million barrels for the SPR, which remains at a 40-year low. The total amount bought so far is 4.8 million barrels, which cost the DoE an average of below $73 per barrel, according to Reuters.
Now, the DoE is saying that it was ready to buy oil for the reserve at a price of $79 per barrel or less. The timeframe for the potential purchases is December and January.
West Texas Intermediate is currently trading at $90 per barrel. Whether it could decline to $79 over the next two months is anyone’s guess but given that OPEC, and more specifically Saudi Arabia, remains determined to keep a lid on production, chances for that are slim, even with higher Venezuelan oil production now that Washington lifted the oil sanctions for six months.
News of the plan to refill the SPR has helped to push oil prices higher, reducing the chance of WTI falling to $79 anytime soon.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.