11/23/2021 | News release | Distributed by Public on 11/23/2021 07:01
President Joe Biden plans to draw down up to 50mn bl of crude from the US Strategic Petroleum Reserve (SPR) as part of a coordinated global release intended to reduce gasoline prices that have surged to a seven-year high.
India has separately agreed to release 5mn bl of crude from its strategic stocks.
The US release of up to 50mn bl will occur over the "next several months" and has been coordinated in parallel with releases by China, India, Japan, South Korea and the UK, the White House said. The global release of crude was needed to balance the market as the global economy has recovered from Covid-19, the administration said.
"Oil supply has not kept up with demand as the global economy emerges from the pandemic," the White House said. "That is why President Biden is using every tool available to him to work to lower prices and address the lack of supply."
The release of crude from the US SPR will occur in two tranches and begin as early as next month. The White House said Biden is prepared to take "additional action" if needed to maintain adequate energy supplies, but it did not offer further details. The administration has not ruled out an idea offered by Democratic lawmakers to reimpose a ban on domestic crude exports.
The US Energy Department in the first tranche of crude intends to offer long-term loans of 32mn bl that will be drawn down during the first four months of 2022, with the option for early deliveries in late December 2021. Participating companies will return the crude they receive in 2022-24, plus a premium based on how long they hold the oil. Bids will be due by no later than 6 December and contracts will be awarded by no later than 14 December.
The exchange will involve releases from the SPR's four storage sites, 10mn bl from Bill Hill, Texas; 10mn bl from Bryan Mound, Texas; 7mn bl from West Hackberry, Louisiana, and 5mn bl from Bayou Choctaw, Louisiana.
For the second tranche of crude from the US SPR, the administration is accelerating the sale of 18mn bl that the US Congress already required under a 2018 budget law. The Energy Department plans to release a notice of sale by 17 December at the earliest, but it did not provide a timeline for the likely drawdown.
The reserve held 604.5mn bl of crude, 252.5mn bl of sweet and 352mn bl of sour crude, as of 19 November, according to the Energy Department.
The global release of crude comes as the Opec+ group is scheduled to meet on 2 December to discuss long-term plans to raise production by 400,000 b/d. The White House has repeatedly said its preference is for oil producers to lift output, but said Biden chose to authorize a crude release as an alternative when the producing countries declined.
"Opec+ has said they are planning to release an additional 400,000 b/d starting in December, and our hope and expectation is that they will continue on that course," a senior administration official said.
By Chris Knight