Link Securities | The US Department of Energy has announced that it wants to buy up to 3 million barrels of oil per day (mbd) for the Strategic Petroleum Reserve (SPR) for delivery in March 2024, taking advantage of lower prices to start replenishing reserves.
It should be recalled that last year the US administration conducted the largest SPR sale to date of 180 million barrels to try to limit a spike in oil prices after Russia’s war with Ukraine began in February 2022. Last October, the Energy Department said it would buy back oil for the reserve at or below $79 per barrel after receiving an average of about $95 per barrel from last year’s emergency sales.
The Energy Department plans to issue monthly bids to buy crude for the emergency reserve until May next year.
Assessment: We believe that this news may serve as a brake on the recent fall in oil prices, a fall caused by the likely weakness in demand and potential oversupply in the market, as investors do not fully believe that the OPEC+ countries will comply with the announced production reductions, either official or voluntary.
