The US Department of Energy said that it will add more than six million barrels of oil to its stockpiles to address “significant” global supply disruption it blamed on Russia's military offensive in Ukraine.
The DoE acquired three million barrels for the US' Strategic Petroleum Reserve (SPR) through contracts that were awarded by the DoE's Office of Petroleum Reserves, it said in a statement on Friday.
They were purchased for an average price of about $73 per barrel, lower than the average of about $95 per barrel that SPR crude was sold for in 2022, “securing a good deal for taxpayers”, the DoE said.
The contracts were awarded to five out of 10 companies who submitted proposals.
The supplies will be delivered to the Big Hill SPR storage site in Texas from August 1 to August 31, it said. Contracts will be awarded to chosen candidates by June 30.
The DoE also announced a new notice of solicitation for a further 3.1 million barrels to be added to the SPR in September, it said.
The move, which is part of the Biden administration's three-part replenishment programme, follows the “historic release from the SPR to address the significant global supply disruption caused by [Russian President Vladimir] Putin’s war on Ukraine”, the DoE said in the statement.
“Analysis from the Department of the Treasury indicates that SPR releases last year, along with co-ordinated releases from international partners, reduced gasoline prices by up to roughly 40 cents per gallon compared to what they would have been absent these drawdowns.”
Crude oil prices rose in March last year after Russia began its special military operation in Ukraine. Brent, the benchmark for two thirds of the world’s oil, peaked at nearly $130 at the time.
That prompted Washington to make the largest sale yet from the SPR of 180 million barrels, which was part of a strategy to stabilise oil markets and fend off high petrol prices.
On Friday, oil prices ended lower and posted a second week of losses on demand concerns and a report that the US and Iran were close to reaching an interim nuclear deal.
Brent slid 1.54 per cent to settle at $74.79 a barrel, while West Texas Intermediate, the gauge that tracks US crude, closed down 1.57 per cent at $70.17 a barrel.
The US strategy to reload its crude stockpiles includes direct purchases with revenue from emergency sales, exchange returns that include a premium to volume delivered and legislative solutions that avoid unnecessary sales unrelated to supply disruptions, according to the DoE.
The department has already seen to the cancellation of 140 million barrels in congressionally mandated sales scheduled for fiscal years 2024 through 2027, leading to “significant progress towards replenishment”, it said.
“The DoE continues to prioritise the operational integrity of the SPR to ensure that the SPR can continue to meet its mission as a critical energy security asset,” it said.
“The SPR has a long history of protecting the economy and American livelihoods in times of emergency oil shortages.”