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Washington — Australia government officials are in talks with US counterparts to store potentially millions of barrels of crude oil in the US Strategic Petroleum Reserve in order to meet international supply obligations, sources said Wednesday.

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The crude, which Australia would buy and store at one or more government-owned storage facilities along the US Gulf Coast, would likely never be shipped to Australia. Instead, the crude would be held in the US on Australia's behalf in order to meet International Energy Agency obligations to hold emergency oil stocks of at least 90 days of net oil imports, US officials familiar with the discussions said.

"The whole idea of the IEA was to build a cooperative demand-side alliance to counter shortfalls in global supply," Kevin Book, managing director with ClearView Energy Partners, said. "A global demand alliance can respond to a global supply shock irrespective of country location. The idea that Australia would benefit from a release from the US SPR is not a crazy one because global prices would be affected."

Analysts with S&P Global Analytics believe that any agreement between the US and Australia would have a net neutral impact on global stocks and no noticeable impact on world oil prices.

As of April, Australia held oil stocks of 57 days of net import cover, including 55 days worth held by industry and two days held by the government, according to the IEA. By comparison, the US held 700 days worth of net crude import cover, including 420 days worth held by industry and 280 held by the government, according to IEA.

As of April, 10 IEA member countries held a portion of their crude oil import cover abroad. Australia held two days of cover abroad, according to IEA.

Australian Energy Minister Angus Taylor said his government and US officials were in discussions over access to the US SPR, according to The Sydney Morning Herald.

"Access through a contractual arrangement would greatly boost our stocks and flexibility of supply," Taylor told the newspaper.

Officials with the US Department of Energy, which operates the SPR, did not respond to requests for comment Wednesday.

By law, foreign governments can store crude in the US SPR, although none currently do.

In September 2018, the US House of Representatives passed a bill which would have allowed DOE to lease unused portions of the SPR to private companies. The bill was never taken up by the Senate.

In April, US Energy Secretary Rick Perry told the Senate Energy and Natural Resources Committee that he was open to leasing portions of the SPR to private companies.

As of Friday, the SPR held 644.8 million barrels of crude in four sites in Texas and Louisiana, including 250.3 million barrels of sweet crude and 394.5 million barrels of sour crude, according to DOE. The SPR has an authorized capacity of 713.5 million barrels of oil.

In March, DOE sold 4.32 million barrels of sweet crude from the SPR, part of a $2 billion modernization plan for the reserve, and the latest in an estimated 290 million barrels of congressionally-mandated sales from the SPR through fiscal 2027.

-- Brian Scheid, brian.scheid@spglobal.com

-- Edited by Gary Gentile, newsdesk@spglobal.com