WASHINGTON (Reuters) – The Biden administration plans to acquire up to 6 million barrels of oil for the Strategic Petroleum Reserve (SPR), according to a source familiar with the matter. This purchase, if completed, would be the largest since the administration began replenishing the reserve following a historic sale in 2022.
The administration is expected to announce this solicitation on Wednesday. The oil will be delivered to the Bayou Choctaw site in Louisiana, one of four major SPR locations along the coasts of Louisiana and Texas.
The U.S. will source the oil from energy companies for delivery in the early months of 2025, the source added.
The Department of Energy is taking advantage of relatively low crude oil prices, which are currently below the target price of $79.99 per barrel set for repurchasing oil after the 2022 SPR sale of 180 million barrels over six months.
As of Tuesday, West Texas Intermediate crude oil was priced at $71.70 per barrel. This is a rise following Hurricane Francine’s disruption of crude output in the Gulf of Mexico last week. However, ongoing concerns about demand have kept prices relatively low in recent weeks.
President Joe Biden announced the 2022 sale, the largest ever from the SPR, in response to Russia’s invasion of Ukraine. This invasion had driven gasoline prices to over $5 a gallon.
To date, the administration has repurchased more than 50 million barrels after selling the 180 million barrels at an average price of about $95 per barrel, according to the Energy Department.
Although oil prices are currently below the target buyback price, geopolitical conflicts and other factors can rapidly increase prices. For example, in April, the U.S. canceled an SPR purchase due to rising prices.
The SPR currently holds 380 million barrels of oil, mostly sour crude, which is suited for many U.S. refineries. The reserve’s peak level was nearly 727 million barrels in 2009.