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The U.S. Department of Energy announced Monday its latest solicitation for another 3M barrels of crude oil for the Strategic Petroleum Reserve, as it gradually replenishes the SPR after selling a record amount of oil from the inventory in 2022 in an attempt to control gasoline prices after Russia’s invasion of Ukraine.
The DoE said the solicitation is part of its strategy of buying oil at $79/bbl or less, below the average $95/bbl it received when making emergency sales from the SPR in 2022; the agency said it has so far bought 23.1M barrels of oil for the reserve at an average price of $76.34/bbl.
The reserve currently holds ~360M barrels, nearly 60% of which is sour crude, which many U.S. refineries are engineered to process; the sales in 2022 drained the SPR to the lowest level in 40 years.
The purchase is scheduled to be delivered in August to the Big Hill SPR facility in Texas.
Front-month Nymex crude oil (CL1:COM) for April delivery settled +1.4% to $77.58/bbl, following last week’s 2.5% loss, and front-month April Brent crude (CO1:COM) closed +1.1% to $82.53/bbl.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (DBO), (DRIP), (GUSH), (NRGU), (USOI)
Houthi rebels in Yemen reportedly narrowly missed hitting a U.S.-flagged tanker over the weekend, and analysts said potential supply disruptions are “haunting” the oil markets.
“Demand is very strong and at the end of the day, it’s about supply and demand,” Price Futures analyst Phil Flynn said.
Goldman Sachs raised its summer 2024 Brent peak forecast by $2 to $87/bbl, noting that the muted price volatility despite the ongoing Middle East and Ukraine wars reflected a modest geopolitical risk premium.
Goldman also sees OPEC+ extending its production cuts next month to keep the market in a moderate deficit, which it sees at 500K bbl/day in Q1 and 400K bbl/day in Q2.
