By Julianne Geiger of OilPrice.com,
The United States is putting another 17 million barrels of crude from the Strategic Petroleum Reserve on offer, one day after the IEA accelerated emergency stock releases as governments scramble to get more oil and fuel into a tight market.
The Department of Energy issued a request for proposals Friday for an exchange of up to 17 million barrels, part of the 172 million barrels Washington committed to make available under the IEA’s 400-million-barrel emergency action announced in March.
The SPR currently holds about 283 million barrels. If companies take the full 17 million barrels before any repayments arrive, inventories would fall to roughly 266 million barrels—squarely inside the 250-million-to-300-million-barrel range generally considered the reserve’s operational minimum zone.
There is one rather large catch: somebody has to want the oil.
DOE offered the final portion of its March commitment in June, requiring companies to return the borrowed crude later with premiums of as much as 24%. Companies agreed to take only about 500,000 barrels.
The government is trying again. The API estimated that U.S. crude stocks fell 11.12 million barrels last week, following a 2.09-million-barrel decline the previous week. Commercial inventories have lost more than 51 million barrels over the last 26 weeks.
Friday’s solicitation follows another escalation in the emergency-stock campaign. The IEA said Thursday that members would accelerate the roughly 100 million barrels still outstanding from March, including more than 20 million barrels of diesel as soon as possible.
Washington is now putting 17 million more barrels on the table, with the SPR sitting at 283 million barrels in a market that already showed once this summer that borrowing government crude on expensive repayment terms is not necessarily a deal refiners want.