Admin Ditches Plan to Buy 6M Barrels of Oil for Reserve

The Biden administration has reportedly canceled plans to purchase 6 million barrels of oil to replenish the Strategic Petroleum Reserve because the prices of oil are expected to keep rising following a cut in output by Saudi Arabia.

The Department of Energy announced its intention to purchase the oil on July 7 to replenish the strategic reserve after the Biden administration released 180 million barrels last year to ease prices following Russia’s invasion of Ukraine. But since then, the price of Brent crude oil has gone from $78.47 a barrel to $83.20 a barrel by the close of business Wednesday, according to The Associated Press. U.S.-based West Texas International crude closed Wednesday at $79.49 a barrel.

The strategic reserve is at 346,758 barrels, its lowest level in 40 years, according to the U.S. Energy Information Association.

The Biden administration is targeting oil prices of between $67 to $72 a barrel to replenish the stockpile, Reuters reported Tuesday. But prices have seen five straight weeks of gains as global demand rises and Saudi Arabia’s supply cuts squeeze markets.

Goldman Sachs projected this week that Brent crude prices will reach $86 a barrel by the end of this year and rise to $93 a barrel by the second quarter of 2024, the Washington Examiner reported Wednesday.

“Oil prices are up 18% since mid-June as record high demand and Saudi supply cuts have brought back deficits, and as the market has abandoned its growth pessimism,” Goldman Sachs analysts said.

The Energy Department “remains committed to its replenishment strategy for the [strategic reserve]” which includes direct purchases, returns of oil that was loaned to companies in the wake of hurricanes and other supply disruptions, and cancellation of planned sales where drawdown is unnecessary, in coordination with Congress, a Department of Energy spokesperson told Reuters.

But last month, Energy Secretary Jennifer Granholm said the administration might not be able to refill the reserve during President Joe Biden’s current term, the Examiner reported.