Biden administration to conduct broad review of US SPR by October

The US Department of Energy will conduct a broad review of the Strategic Petroleum Reserve by the end of September, the first in five years, to assess its size and responsiveness to current energy markets.

DOE agreed to conduct the review and consider a "full range of options for handling potentially excess assets" at the recommendation of a 2018 report by the Government Accountability Office, according to an updated report published June 30.

"Since the SPR was created four decades ago, its structure generally has not changed, even as markets for crude oil and petroleum products have changed significantly," GAO said.

DOE declined to take up GAO's recommendation to study the costs and benefits of regional petroleum product reserves because they would be an "inefficient and expensive solution to respond to regional fuel supply disruptions," GAO said in the latest report.

GAO continues to recommend studying government-owned regional product reserves so Congress can make decisions about them.

As of June 25, the SPR held 622.5 million barrels of crude, about 60% sour and 40% sweet, according to the latest DOE data.

Infrastructure funding

Selling crude from the stockpile is one funding source for the $1.2 trillion Bipartisan Infrastructure Framework announced June 24 by the White House and a group of senators from both parties.

Lawmakers hope to raise $6 billion from SPR crude sales for the package, but it's too early to tell what that could mean for the stockpile, said ClearView Energy Partners in a June 28 note to clients.

ClearView said there are many caveats to how the final infrastructure deal might impact the SPR, including a higher or lower revenue requirement, that final language could set a revenue target that leaves market prices to determine volumes, and that sales might occur anywhere within a 10-year budget window.

Four annual 20-million-barrel sales starting in fiscal 2022 "would imply relatively muted supply impacts from previously established and potential sales on an annualized daily volume basis," ClearView said. But twice-a-year sales would have a bigger impact and could shrink the SPR inventory to the point that it raises "operational questions regarding site closures and pipeline routes," it said.

SPR deliveries from previous congressionally mandated sales are starting to wind down for fiscal 2021, but another 15 million barrels is likely to hit the market in October, said Paul Sheldon, chief geopolitical adviser for S&P Global Platts Analytics.

Deliveries averaged 245,000 b/d in the week to June 18 for a total of 13.9 million barrels sold since April 3. Platts Analytics expects another 2.8 million barrels to hit the market by the end of June.