Florence Tan, Arathy S. Nair

(Reuters) – The United States launched an auction to purchase 32 million barrels of crude oil at four strategic petroleum reserves sites (SPR) in late December and early April 2022. This was announced by the Department of Energy (DOE).

SPR oil (which is largely blended sour sour crude) is anticipated to decrease the U.S.’s sour Mars price and help buyers in Asia that process mainly high sulphur oils.

U.S. President Joe Biden’s administration declared Tuesday that millions of barrels will be released from strategic oil reserves. It was coordinated with China, India South Korea, Japan and Britain to attempt to lower prices following repeated refusals by OPEC+ producers to increase crude.

DOE stated on its website that about 10,000,000 barrels would be made available in Texas from Big Hill, Bryan Mound and Louisiana from West Hackberry and Louisiana from West Hackberry. There will also be approximately 7 million barrels in Louisiana from West Hackberry. In Louisiana, DOE estimates another 5 million barrels coming from Bayou Choctaw.

Delivery will be January to April 2022. Early deliveries are accepted until December.

DOE stated that buyers will need to return oil between 2022-2024.

The deadline for companies to submit their bids is Dec. 6, and the contract will not be issued after that date.

A trader stated that this is equivalent to 270,000 b/d of medium-sour grades and direct competition to Mars. He also said API gravity will be 31-33 degrees for the crude oil to be released.

“Overall, very good news for Asian buyers of Mars – already depressed at some -$3.50 per barrels vs WTI, Mars should weaken even further.”

DOE will also make an announcement about the possible sale of up to 18 Million barrels SPR crude at no later than December 17.