Investing.com -- The U.S. Department of Energy is to buy 3 million barrels of crude in its first attempt to refill the nation’s oil reserve after extensive draws over the past 18 months, according to a Bloomberg report on Monday that did not specify a timeline for the purchase.
Crude futures spiked briefly in New York’s post-settlement trading, reacting to the report, before retracing from their highs to not far from where they settled on Monday, as traders had more questions to the story.
Since last week, news wires have used sources within the Department of Energy or Biden administration to report about the government’s attempts to refill the Strategic Petroleum Reserve, or SPR.
Last week, a headline erroneously stated that all scheduled SPR sales will be canceled in a bid to hasten the refill.
U.S. Energy Secretary Jennifer Granholm later clarified in a briefing with lawmakers in Congress that purchases would only begin after the completion of mandated sales that would end next month.
Bloomberg noted in its Monday report that an earlier attempt to refill the reserve, via another 3M barrel purchase, was canceled by the Energy Department in January, saying the offers it received were either too expensive or didn’t meet other specifications.
The administration said toward the end of last year that its aim was to refill the reserve when prices were at or below about $67-$72 per barrel.
On Monday, New York-traded West Texas Intermediate, or WTI, crude settled up $1.07, or 1.5%, at $71.11 per barrel. WTI had fallen by 15% over the past four weeks.
WTI jumped briefly in post-settlement trade to $71.67, reacting to the latest Bloomberg report on the SPR. By 17:11 ET (21:11 GMT), it had fallen back from those highs to trade at $71.31.
The administration has leaned heavily on the SPR since late 2021 to offset tight crude supplies that had raised fuel costs for Americans. As of last week, the SPR's crude balance was at its lowest since November 1983 after the release of about 200M barrels or more from the reserve over the past 18 months.
The Biden administration’s use of the SPR has been a highly-charged matter for oil bulls and opponents of President Joe Biden. Both sides accuse him of indiscriminately releasing hundreds of millions of barrels from the stockpile to subdue crude prices and shore up his political standing with American voters — when the reserve is meant for emergency use, in times of critically short oil supply.
Biden, in his defense, said he was acting to reduce record high pump prices of fuel, which stood at above $5 per gallon last June and now hovers at around $3.50. The administration also blames last year’s high crude prices for U.S. inflation getting to four-decade highs of above 9% in June.