The U.S. has witnessed a noteworthy addition of 2.9 million bbl of oil to its Strategic Petroleum Reserve in August, marking the largest monthly increase in stockpile in over three years. According to data released by the Department of Energy on Tuesday, the reserve now holds a total of 350.3 million bbl of oil, consisting of 143.5 million bbl of sweet crude and 206.8 million bbl of sour crude.
This increase in sour crude barrels is a part of the Biden administration’s previously announced purchase of crude for delivery in August at an average price of about $73/bbl. The average price of U.S. benchmark West Texas Intermediate crude futures during the month was $81.32/bbl, as noted by OPIS data.
To combat high energy prices, the administration decided to initiate the process of refilling the reserve, which had witnessed over a 43% reduction in inventories since November 2021 due to regular releases. The refilling efforts are likely to continue throughout September as contracts have already been awarded for the purchase of an additional 3.2 million bbl of crude in that month, at an average price of about $71.98/bbl.
However, these upcoming inputs may be the last in the near term since plans to purchase an additional 3 million bbl each in October and November have been canceled due to a recent surge in crude prices.
While the Department of Energy has expressed its readiness to resume purchases once prices drop, it is anticipated that crude prices will remain high following Saudi Arabia’s announcement on Tuesday that it would extend a production cut of 1 million b/d until the end of the year. As a result, the price of WTI has risen from approximately $69/bbl prior to the production cuts to nearly $88/bbl in trading on Tuesday, following the Saudi announcement.