DOE Offers 17 Million SPR Barrels After June Exchange Drew Only 500,000 Barrels at Premiums Up to 24 Percent

The US Department of Energy on Friday issued a request for proposals for an exchange of up to 17 million barrels of crude from the Strategic Petroleum Reserve, according to Reuters. The offer draws on the 172 million barrels Washington committed in March under the International Energy Agency's 400-million-barrel emergency action. The previous batch drew almost no takers.

In June, DOE required borrowers to return barrels with premiums of up to 24%, and companies agreed to borrow only about 500,000 barrels, Reuters reported. That uptake equals roughly 3% of the 17 million barrels now on offer. The question for refiners and traders is whether this round carries terms that justify borrowing at all.

What the SPR holds after months of drawdown

The SPR held 282.98 million barrels in the week ended October 9, per the EIA Weekly Petroleum Status Report. Commercial crude stocks excluding the SPR stood at 415.58 million barrels after an 8.56 million barrel draw that week. US crude production ran at 13.68 million barrels per day.

If bidders took the full 17 million barrels, SPR inventory would fall to about 265.98 million barrels, a 6.0% reduction. OilPrice.com noted that level still sits inside the 250 to 300 million barrel range generally treated as the operational floor. Our September 29 coverage recorded the reserve at 283.8 million barrels, its lowest since October 1982.

Archive comparison: what changed since September

On September 29 Brent closed at $102.59 per barrel and WTI at $88.66, a spread of $13.93. Investing.com futures data lists Thursday's settlement at $105.92 for Brent and $97.97 for WTI, a spread of $7.95. Brent is up $3.33 since then, while WTI has gained $9.31.

US crude has rallied faster than the global benchmark, and the spread has narrowed by $5.98 per barrel in under three weeks. The $13.93 gap comes from our September archive and the $7.95 gap from Thursday's futures settlements. Our report on the IEA acceleration covered the diesel side of the same release.

Derived math: what 17 million barrels means

At Thursday's Brent settle of $105.92 per barrel, 17 million barrels carry a notional value of about $1.8 billion. Against US production of 13.68 million barrels per day, the full offer equals roughly 1.2 days of domestic output. The volume is a bridge for a few days of tightness, not a supply fix.

A 24% premium would require returning 4.08 million extra barrels on a 17 million barrel loan. At the same Brent price, that premium is worth about $432 million. For June bidders, that was a steep price for a loan of crude.

Hormuz keeps the pressure on

Iranian strikes on tankers continue. Kpler data cited by OilPrice.com showed average daily oil flows through the Strait of Hormuz at 11.62 million barrels in the week to October 13, against a baseline of 17.15 million. ING said the market is pricing in "a significant risk premium." Removing it would require "some kind of agreement between the US and Iran," ING added. Our earlier report on the tanker strikes tracked the API crude draw of 11.12 million barrels.

OilPrice.com's live ticker showed Brent at $109.6 per barrel and WTI at $101.5 on Friday, up 3.5% and 3.6%, though the site published no timestamp for the quotes. The IEA said Thursday that members will accelerate the roughly 100 million barrels still outstanding, including more than 20 million barrels of diesel. Diesel prices remain near record levels ahead of the November 3 midterm elections.

DOE had not published a bid deadline or delivery window in the coverage reviewed, and neither Reuters nor OilPrice.com gave one. Bidders will watch those terms closely. If the premium falls well below June's 24% ceiling, uptake could rise sharply; if it stays high, the SPR may again sit largely untouched.