Higher oil prices force U.S. to withdraw offer to buy 6 million barrels

The United States Department of Energy recently withdrew its proposal to acquire 6 million barrels of crude oil for the Strategic Petroleum Reserve (SPR). This decision comes in the wake of a sharp rise in oil prices, which have reached their highest point in three months. Several factors have contributed to this surge: robust demand projections, production cuts by OPEC, and a marked reduction in U.S. oil inventories.

In the previous year, the White House authorized the release of 180 million barrels of crude oil from the SPR, aiming to curb escalating fuel prices. However, this move was met with skepticism, as critics questioned its effectiveness in controlling prices and raised concerns about potential risks to national energy security. Despite these reservations, the release did contribute to a decrease in fuel and oil prices. Subsequently, later in 2022, the administration declared its intention to repurchase crude for the SPR, targeting a price range around $70 per barrel.

Throughout this year, the White House's approach towards replenishing the SPR has been a balancing act, oscillating between caution and readiness. This stance has been partly shaped by pressure from Republican members of Congress who advocate for maintaining a robust strategic oil reserve. In early July, when oil prices fell within the desirable bracket of $67 to $72 per barrel, the Department of Energy initiated an offer to purchase 6 million barrels. However, this offer was specifically for sour crude, a type of oil that has become increasingly scarce. The limited supply can be attributed to sanctions against Russia and production cuts by Saudi Arabia, factors that have contributed to even higher prices for this specific oil type.

Despite the cancellation of this purchase offer, the Department of Energy reaffirms its commitment to replenishing the SPR. At the time of this update, West Texas Intermediate crude oil was trading at over $82 per barrel. This price represents a significant increase of more than $10 per barrel compared to the early July figures when the offer was made, illustrating the volatility and unpredictability of the oil market. This situation reflects the complex interplay of global events, market dynamics, and policy decisions that continue to shape the landscape of energy economics.

Source: OilPrice.com “ U.S. Withdraws Offer To Buy 6 Million Barrels Of Oil For The SPR”