With West Texas Intermediate (WTI) crude oil prices at a 52-week high of $66.42 a barrel, the U.S. Department of Energy announced last week that it had awarded contracts for sales of 10.1 million barrels of crude oil from the U.S. Strategic Petroleum Reserve (SPR). The expected end of the COVID-19 pandemic, combined with restricted production from the OPEC+ group, have been moving crude prices higher since November, following the announcement of two vaccines that will slow the spread of the coronavirus.
As oil supply and demand go, 10.1 million barrels is about 1% of the global daily consumption of crude and less than 5% of one day’s U.S. consumption. The SPR’s maximum capacity is approximately 727 million barrels and, as of the end of December, the reserve held just over 638 million barrels.
In the eight-year presidential administration of George W. Bush, the SPR grew from about 541 million barrels in January of 2001 to essentially full capacity at the end of 2009. The Obama administration released about 30 million barrels in 2011 as part of a 60-million barrel global release from strategic reserves. Another 5 million barrels were sold in March 2014 as a message to Russian President Vladimir Putin following Russia’s incursion in Ukraine.
Since then, another 55 million barrels have been sold through congressionally authorized sales and the proceeds have been deposited in the U.S. Treasury. This recent sale was mandated by Congress when it approved the federal Budget Act of 2015 and the Appropriations Act of 2018. Proceeds of the sale will be deposited in the U.S. Treasury by the end of the 2021 fiscal year in September.
The U.S. SPR is maintained in four underground salt caverns scattered along the Gulf Coast of Texas and Louisiana. The 10.1 million barrels sold last week include 4.1 million barrels from the Bryan Mound site near Freeport, Texas; 3.3 million barrels from the West Hackberry site near Hackberry, Louisiana; and 2.7 million barrels from the Big Hill site near Winnie, Texas.
The Bryan Mound site has 19 storage caverns and an authorized capacity of 247.1 million barrels, while 21 caverns comprise the West Hackberry and have an authorized capacity of 220.4 million barrels. The Big Hill storage site includes 14 caverns and a capacity of 170 million barrels. The fourth site, Louisiana’s Bayou Choctaw, has six storage caverns and an authorized capacity of nearly 71 million barrels.