With oil prices continuing to extend declines, dropping 2% last week and continuing to fall on Monday, the prime time for the U.S. refill the Strategic Petroleum Reserve (SPR) is limited by constraints on the Gulf Coast underground caverns.
Speaking to Bloomberg on Monday, Deputy Energy Secretary David Turk said physical constraints and maintenance on the network of underground caverns on the U.S. Gulf Coast mean the government can only purchase three million barrels per month right now.
“We are refilling as much as we can. We have been doing that for the last several months, and at this price level we’ll keep doing it,” Turk told Bloomberg. However, three million barrels is the physical limit of how much the U.S. can buy back right now. “We will be doing at least 3 million barrels, and we hope that we can bring more capacity online at these price levels to buy as much as we can to refill to make sure we’ve got that available when we need it in the future,” Turk said. Members of the International Energy Agency (IEA) have been required (in a non-legally-binding manner) to hold 90 days worth of net oil imports in a strategic reserve for emergency supply. The US SPR is built in a series of underground salt caverns along the Gulf Coast.
Right now, “emergency drawdowns, planned sales since 2020 have reduced crude oil inventories held by the U.S. Strategic Petroleum Reserve (SPR) to a 40-year low”, according to the Federal Reserve Bank of Dallas. At the same time, the bank notes that “SPR inventories are roughly double their historic average, even at today’s low absolute level. On the other hand, inventories sit at historic lows today relative to gross oil imports—the equivalent of 55 days of import cover”.
By Charles Kennedy for Oilprice.com
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