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01 December 2023

US to resume oil purchases for stockpile

The US reserve currently holds 702 million barrels of oil. (GETTY IMAGES)


Taking advantage of low prices, the United States government is resuming purchases of crude oil for its emergency stockpile.

The Department of Energy (DoE) said it will seek contracts and make other arrangements for the delivery of nearly 20 million barrels of oil to the government's Strategic Petroleum Reserve in the coming months. The reserve, a system of caverns on the Louisiana-Texas coast, currently holds 702 million barrels of crude.

The department said it will buy 12 million barrels to replace the oil that was sold from the reserve in 2005 to meet shortages after Hurricane Katrina disrupted oil production in the Gulf of Mexico. Another 2.18 million barrels will be bought to make up for oil that did not go into the reserve last year after Congress banned purchases because of high prices and tight supplies. The ban expired at the end of the year.

The government also is calling for the return of about 5.5 million barrels of oil that was loaned to refiners last year after hurricanes Gustav and Ike disrupted supplies.

These actions, along with purchases previously planned for 2009 of about 25,000 barrels a day, will bring the government reserve to its storage capacity of 727 million barrels by the end of the 2009, the department said in a statement. That is equal to about 70 days of oil imports.

"DoE plans to take advantage of the recent sharp decline in crude oil prices to enter the market," said the department. It said it will use the $600 million received for the oil in 2005 to replace that oil and buy additional oil.

In the aftermath of Hurricane Katrina that hit in September 2005, oil cost from $62 to $67 a barrel on the spot market. Crude oil sold for a little over $46 a barrel on Friday on the New York Mercantile Exchange for February delivery.

The department solicitation for replacing the 12 million barrels is for February, March and April deliveries.

The other oil shipments will come from the Interior Department's so-called "royalty-in-kind" programme where the government collects quantities of crude oil, instead of collecting cash royalties, from oil pumped on federal land and waters.

The Bush administration suspended oil deliveries into the government reserve last May.