Crude Spikes After White House Says It Will Start Refilling Strategic Petroleum Reserve

Having drained more than a third of the SPR since the start of the year, helping push the price of oil to 2021 levels…

… and with the midterm elections now history, moments ago the White House announced that it would begin unwinding its politically-motivated drainage of the US emergency reserve and will start replenishing the nation’s emergency oil reserves, starting with a 3 million barrel purchase of crude in February. Much more buying lies ahead.

“This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security,” the Energy Department said in a notice Friday announcing the plan.

The Biden administration previously laid out a plan to repurchase oil for the approximately 700 million barrel-strong reserve when the price of crude hit around $70 a barrel.

US government seeks 3 million barrels of sour crude for the re-fill the SPR. It’s a fraction of the nearly 200 million released so far in 2002 — but it’s a signal to the market | #OOTT https://t.co/xWcJ4ooqLL pic.twitter.com/ppvHWPhsZD

— Javier Blas (@JavierBlas) December 16, 2022

The purchases are being made using a new rule tweak that allows the Energy Department to buy oil using fixed-price contracts. Previously, the DOE could enter into contracts for future delivery, but the price paid reflected prices at the time the product was delivered.

In addition, the DOE said that it will simultaneously provide roughly 2 million barrel in crude oil to meet emergency supply needs caused by the shutdown of TC Energy Corp.’s Keystone pipeline (in an exchange, an entity — often a refiner — borrows from the SPR for a brief period due to extreme circumstances and later replaces it in full, along with a premium of an additional amount of oil, according to the agency’s website).

Naturally, the price of oil spiked having earlier traded at the lowest price since Dec 2021 and has now set a true bottom…

… and with China demand about to be unleashed now that covid zero is a thing of the past, it’s all uphill from here.

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