Administration seeks offers of crude oil for SPR by March 26

The US Department of Energy has issued a solicitation to buy up to 30 million bbl of domestic crude oil from US producers—a quick first step in a program to fill up the Strategic Petroleum Reserve (SPR).

The request for proposals is for sweet and sour crude oil with a focus on small to midsize oil producers, and companies must use US-flag vessels, the Energy Department said Mar. 19. Offers must be received by 11 a.m. CST Mar. 26.

Recognizing that companies need time to plan for delivery logistics, the solicitation is for oil to be delivered from May 1 to June 30, although April deliveries are encouraged.

The department is looking for firm fixed-price contracts. Multiple contracts may be awarded.

“The small to midsize oil producers, which are the focus of the initial crude oil purchase, employ thousands of Americans,” Under Secretary of Energy Mark Menezes said in a statement released to announce the solicitation. “These businesses have been particularly hard hit by recent events.”

The recent events include the demand-reducing impact of the coronavirus pandemic and the price-depressing market competition that has erupted between Saudi Arabia and Russia, as noted by US Energy Secretary Dan Brouillette Mar. 19.

The Energy Department “is moving quickly to support US oil producers facing potentially catastrophic losses from the impacts of COVID-19 and the intentional disruption to world oil markets by foreign actors,” Brouillette said.

The decision to fill up the SPR, which has room for about 77 million additional barrels, was announced Mar. 13 by President Trump (OGJ Online, Mar. 16, 2020).

Sour crude usually costs less than benchmark West Texas Intermediate crude. If the mix of purchases for the SPR average $23/bbl, a little below the Mar. 19 futures prices tied to WTI, the government would spend $1.77 billion to buy 77 million bbl.