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The federal U.S. government has decided to go ahead with the sale of 26 million barrels of crude from the strategic petroleum reserve that was approved by Congress in the recent past, after briefly considering a cancelation.
Energy Intelligence reported last month, citing an unnamed source, that the Biden administration was considering canceling the sale that was to take place by September this year.
That sale, unlike the emergency sales of 180 million barrels from the SPR that took place last year, was a regularly scheduled one. According to the Energy Intelligence report, there were rumors that these 26 million barrels could have followed the fate of another 140 million barrels that were planned to be sold between 2023 and 2027 but got canceled.
Yet according to a new Reuters report, the Department of Energy had announced it would conduct the sale of the 26 million barrels. This, Reuters noted in its report, would push the SPR even lower than it already is, which is the lowest in 40 years.
The reason for the low levels of the country’s strategic petroleum reserve is the 180-million-barrel sale that President Biden mandated last year in a bid to reduce exorbitant retail fuel prices resulting from the global oil price rally, itself a market reaction to Russia’s invasion of Ukraine and the consequent barrage of sanctions the collective West unleashed on it.
The additional sales, contrary to many expectations, did the job, not least because oil prices themselves began to decline after the initial jump amid the heightened geopolitical uncertainty. Yet worry began to emerge about the state of the SPR and when it would be replenished.
The administration announced a range of between $67 and $72 per barrel, at which it would begin buying crude to refill the SPR but prices have not declined to those levels since last year.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com