The Energy Department spokeswoman said the Biden administration rescinded an agreement to acquire six million barrels of oil for the Strategic Petroleum Reserve on Tuesday. Because Saudi Arabia is limiting output, analysts expect oil prices to rise.
July 7 saw the U.S. latest Strategic Petroleum Reserve auction for sour crude oil. After Russia invaded Ukraine last year, the government withdrew 180 million barrels from the reserve for the first time to stabilize prices. To compensate, the Energy Department acquired 6.3 million barrels in recent months.
The SPR’s representative claimed the decision was based on “market conditions,” not oil companies’ rejections. The source didn’t explain, but oil scarcity has driven the global price of a barrel to above $80. Oil prices are projected to rise in the coming months because Saudi Arabia will decrease output by one million barrels per day in July, and eight other OPEC+ members will cut production in April.
The American Petroleum Institute said Tuesday that U.S. crude oil stockpiles fell 15.4 million barrels in the week ending July 28. The Biden administration will buy more for the reserve when oil prices reach $67 to $72.
According to a spokesperson, the Energy Department “remains committed to its replenishment strategy for the SPR,” which includes direct purchases, the return of oil loaned to companies after hurricanes and other supply disruptions, and the cancellation of planned sales where drawdown is unnecessary. Congress aids this approach. Direct buys. Returns of storm-borrowed oil. Cancelled sales. Due to unprecedented sales over the last year, oil in the store has decreased to its lowest level in over forty years, even though U.S. crude oil production is increasing.