US Energy Secretary Chris Wright said companies could receive new crude oil loans from the Strategic Petroleum Reserve as oil prices rise and supply is expected to tighten in the near term.
In remarks on Thursday, Wright said market conditions had made the use of additional oil from the reserve a strong possibility. The program authorized by President Donald Trump in March allows for the withdrawal of a total of 172 million barrels.
Near-term prices surpass six-month contracts
West Texas Intermediate crude for delivery next month traded at approximately $101. The near-term price remained about 25% above the price for delivery six months from now.
When near-term contracts trade above those for delivery at later dates, the market structure is known as backwardation. This pricing structure makes it more commercially attractive for companies to borrow oil from the reserve.
More than 130 million barrels allocated from the reserve
The Energy Department has so far lent companies more than 130 million barrels of crude oil under the authorized program. This amount represents more than three-quarters of the total withdrawal authorization.
Another 3 million barrels are planned for release in the coming weeks. Approximately 38.5 million barrels remain unallocated under the program.
Wright said sales had been halted when prices were moving sideways. He said current conditions could allow the oil allocation initially planned under the program to be completed.
Reserve stocks at their lowest level since 1982
Under the program, companies borrow the government's crude oil and later return the amount they received along with an additional premium. Under previous agreements, the reserve was expected to recover approximately 1.25 barrels for every barrel borrowed.
With withdrawals continuing, crude oil stocks in the Strategic Petroleum Reserve have fallen to approximately 285 million barrels. This is the lowest inventory level recorded since 1982.
Wright said the return of the loaned oil was expected to begin early next year and continue through 2029.
