With crude oil prices well off the highs from earlier in the year, the U.S. Department of Energy announced Friday it has started the process to repurchase crude oil for the Strategic Petroleum Reserve. The monthslong bid to sell SPR stockpiles in an effort to keep oil prices down throughout 2022 also brought in a substantial financial gain. Oil stocks were mixed as oil prices rose on Monday.
The shift in SPR strategy comes as releases are set to end this month. The DOE will begin with an initial 3-million-barrel purchase of crude oil. It sold a total of 180 million barrels at an average $96 per barrel. That amounts to a windfall of around $4 billion, as it sets out to buy currently, with prices around $75 a barrel.
"This repurchase is an opportunity to secure a good deal for American taxpayers by repurchasing oil at a lower price than the $96 per barrel average price it was sold for, as well as to strengthen energy security," the department said in a news release.
U.S. crude oil was up 1.9% Monday and approaching $75.70 per barrel. This is down about 40% from the soaring prices earlier in the year prodded by Russia's invasion of Ukraine. The current price also represents around a 20% price discount to the $96.25 average price the U.S. was selling SPR barrels at.
Average gasoline prices at the pump on Monday were $3.14 per gallon, down 37% compared to the June 14 high of $5.02, according to AAA.
Oil Stocks And The SPR
The Wall Street Journal reported Monday the Biden administration has lowered expectations for how much oil needs to be housed in the SPR. There are currently 382 million remaining barrels in the strategic reserve. The U.S. has been planning to add to the SPR crude prices at around $70 per barrel, the WSJ reports. Analysts see U.S. crude prices likely to remain in the $80-$90 per barrel region through the first half of 2023.
The Department of Energy reports there were 593 million barrels in the SPR at the beginning of 2022. SPR oil stockpiles peaked at 727 million barrels in 2009. Storage needs for national security and energy crisis scenarios are less than they were prior to the shale oil revolution, the WSJ reported, because the U.S. is now less dependent on non-U.S. suppliers.
Oil stocks generally booked losses Monday during market trading. However, energy giant Exxon Mobil added 0.4% while Chevron jumped 0.7%. Oil stock Marathon Petroleum added 1.2%.
With the market in an uptrend under pressure, Exxon Mobil is working on a flat base with 114.76 buy point, according to MarketSmith analysis.
Along with XOM, CVX and MPC, oil stocks Apache added 0.1%. Meanwhile, Devon Energy shed 1.4% and Occidental Petroleum dropped 0.2% Monday.
Oil field service firms Halliburton traded up 0.5% while Baker Hughes dropped 0.4%. Schlumberger edged up 0.9% Monday.
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