Delays in oil to U.S. emergency reserves slows refill initiatives
(Bloomberg) – Efforts to refill the U.S. emergency oil reserve are being slowed, in part, by companies delaying their return of borrowed barrels.
Shell Plc, TotalEnergies SE and Chevron Corp were among nine companies that borrowed government oil as part of an exchange program the past two years. Though they were due to repay the crude this year and next, the three companies received U.S. approval to delay about 5 MMbbl in returns until 2024 and 2025, according to government documents seen by Bloomberg.
The repayment of exchange barrels has been a key part of the Energy Department’s strategy to refill the emergency stockpile, which has been drained to the lowest level since the 1980s. While the documents don’t cite the reasons for the delays, the postponements are the latest indication that replenishing the reserve will be a slow and halting process.
The Energy Department’s attempts to directly purchase crude for the reserve have already been hampered by disagreements over price and quality, with the agency canceling two bids to buy a total of 9 MMbbl this year. So far, the U.S. had bought only 7.5 MMbbl of the 12 MMbbl it planned to purchase this year.
“That means we remain vulnerable in case a hurricane disrupts supplies or geopolitical tensions escalate,” Hunter Kornfeind, an oil market analyst at Rapidan Energy Group, said. Kornfeind doesn’t expect the energy department will carry out “mass” purchases and will focus on opportunistic ones.
Shell, TotalEnergies, Chevron and Aramco didn’t immediately return messages seeking comment.