US Prepares to Buy 3 Million Barrels of Crude Oil for Strategic Petroleum Reserve

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The United States (US) Department of Energy has announced a bold plan to secure oil supplies in uncertain times. With the price of oil falling below the critical threshold, the government plans to buy 3 million barrels of crude oil for the Strategic Petroleum Reserve (SPR), marking an important attempt to strengthen the economy and ensure safe supply of oil.

Fighting Out of Stock

Since the inauguration of President Joe Biden, SPR’s crude oil stocks have fallen from 638 billion barrels to just 347 billion. This drastic reduction is a response to the administration’s desire to reduce the price of fuel for consumers, but has been criticized for its impact on the country’s energy security.

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The large sale of crude oil reserves has created controversy, as has the perception of the slow response of the US government to the drop in oil prices. This is considered a missed opportunity to replenish SPR oil inventories.

Purchase threshold changes

The US government initially announced its intention to refill the SPR when oil prices fell below $70 per barrel, but later changed that figure to $79 per barrel. Currently, the price of crude oil is trading at $71, which is within the range desired by the Biden administration to start the replenishment process.

The 3 million barrels planned to be purchased for delivery in March represent only 1% of what has been consumed so far. Additionally, it is important to note that previously traded crude oil from SPR was trading at around $95 per barrel.

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To date, the US has taken approximately 9 million barrels of crude oil as part of recovery efforts following the stockpile sale.

Declining crude oil prices

Crude oil prices have seen a steady decline in recent weeks, with West Texas Intermediate (WTI) losing $15 per barrel over the past two months, and Brent losing $13 over the same period. time. These major changes in oil prices have increased the urgency of purchasing crude oil for the SPR.

Reasons behind the slowness

The SPR’s replenishment speed has been affected by modernization efforts known as “Life Extension 2,” which aim to improve the reserve’s operational integrity. The Biden administration should also be careful to avoid buying excessive amounts of crude oil in a short period of time, because it could cause an increase in oil prices and negatively affect consumers.

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