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Monday, 01 December, 2008, 23:10 GMT | more >>

Washington firm on topping up SPR tanks



By Upstream staff 

The US Department of Energy has no plans to stop adding about 70,000 barrels per day to the Strategic Petroleum Reserve, despite crude prices topping $100 a barrel, Katharine Fredriksen, the head of the department's Office of Policy & International Affairs, told a US Senate committee today.

Fredriksen told the Senate Energy Committee that the SPR should reach a record 700.7 million barrels of oil by the end of March.

Many energy experts and US lawmakers are against boosting the emergency oil stockpile at this time, saying taking oil off the market pushes crude prices higher.

Democrat Jeff Bingaman, who chairs the Senate energy panel, said the government should actually withdraw oil from the stockpile to put more supplies in the market.

"As we face the threat that Venezuela might suspend oil shipments to the United States, it is more appropriate in my view to consider releasing the SPR rather than filling it," Reuters quoted him as saying.

However, Fredriksen said the amount of oil going into the reserve was less than one-tenth of 1% of the 85 million barrels of crude consumed daily around the globe.

"The modest fill rate does not put undue pressure on markets," she told lawmakers. "It's a minimal amount of oil."

"I think that's nuts, frankly," said Democrat Byron Dorgan of putting more oil in the reserve when prices are so high.

Frank Verrastro, energy expert with the Centrr for Strategic & International Studies in Washington, said the Bush administration's withdrawal of oil from a tight market encourages and emboldens traders and speculators to talk up oil prices without fear of reprisal.

He said the administration's insistence on continuing to fill the SPR "severely undermined" US appeals for Opec to ramp up oil output.

Legislation pending in the Senate, which was co-sponsored by Dorgan and Bingaman, would bar the department from adding oil to the reserve this year, unless the price of crude fell below $50 a barrel, a price level not expected any time soon by most energy experts.

Dorgan later told Reuters he would raise the bill's price threshold, possibly to $70 a barrel.

Fredriksen said the Energy Department will carry out the White House plan to buy $584 million worth of crude for the reserve this year to help replace 11 million barrels of oil sold to refiners in 2005 after hurricanes disrupted supplies.

Deliveries to the stockpile could rise to 125,000 bpd between May and September when oil purchases are added, according to the department.

"Before buying additional reserves, (the department) will conduct a market assessment and make a determination whether it is a reasonable time to issue a solicitation," Fredriksen said.

Based on an oil price of $90 a barrel, the department says the SPR inventory is worth $62.8 billion.

As the Bush administration moves forward with filling the reserve, Frank Rusco with the Government Accountability Office said that to save money, the department should put more inexpensive, heavy crude in the stockpile which is more compatible with many US refiners and store less lighter, sweet oil.

Fredriksen said more heavy crude will be included when the stockpile is expanded to 1 billion barrels, but sweet oil is preferred for the current storage levels.

"Heavy crude will take up more volume, leaving less reserves and less import protection," she said.

The reserve has enough oil to meet about 56 days of total US crude imports, a Reuters report said.

Tuesday, 26 February, 2008, 18:37 GMT  | last updated: Tuesday, 26 February, 2008, 18:37 GMT

Adding to the stockpile: the Department of Energy has no plans to stop buying crude for the SPR
 

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