Strategic Petroleum Reversal
Updates along the US SPR's new and bumpy refill road
Become a paid subscriber today to view this full Oil in 2022 review report and join me in my hunt for ever-deeper oil & gas market context.
If you’re already subscribed and/or appreciate the free chart and summary, hitting the LIKE button is one of the best ways to support my ongoing research.
There continues to be cautious and unsteady steps in the evolution of the US Strategic Petroleum Reserve (SPR), which has been given a much more active role by the Biden administration, with two big developments over the past month.
First, the recently-passed omnibus spending bill cancels a swath of congressionally-mandated SPR sales between FY2024-27 and dramatically increases the flexibility of the Reserve, in addition to avoiding the confusing situation where DOE was forced to sell crude while at the same time trying to buy supplies to refill the Reserve
Second, DOE announced on January 6th that it had no acceptable offers in response to its solicitation to buy 3 MMbbl of crude to refill the SPR, stating that the offers were either too richly priced or were of the wrong quality of crude.
While I should note that the DOE really doesn’t need to refill the SPR right now, it seems most likely that the Biden administration will continue to attempt to refill part of the SPR this year; if so, the window in which to act is unknowably short with prices poised to shoot higher on a host of potential triggers.
Yes, this is another [short-ish] post about the US Strategic Petroleum Reserve (SPR)—I’ve covered this topic extensively over the past year here, here, and here. But beyond my own admitted fascination with the subject, two big developments have occurred over the past month that warrant discussion, especially given the ubiquitous politicking that surrounds all things SPR. First, the cancellation of 140 MMbbl of congressionally-mandated sales between 2024-27 (a good thing!) followed, second, by the recent revelation that the first attempt at a refill solicitation using the fixed-price forward contract mechanism failed to yield any acceptable offers (a not-so-good thing!).