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(Bloomberg) — The US Energy Department reiterated Sunday that a planned 172-million-barrel release of oil from the country’s Strategic Petroleum Reserve would be structured as an exchange.
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The agency gave more details on the release Friday, clarifying it would begin with an exchange — essentially a loan that companies must eventually return with interest — of 86 million barrels. The oil is expected to begin moving to market this coming week. Energy Secretary Chris Wright earlier referred to the action as a release, leading to some confusion among traders who initially interpreted the plan as an outright sale.
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An Energy Department spokesman said an exchange was the plan all along. He pointed to the reference in Wright’s initial announcement to refilling the reserve with approximately 200 million barrels within the next year, or about 20% more than what was being released, at no cost to the taxpayer. That would only be possible with an exchange, the spokesman said. Wright also referred to the release as an exchange in an CNN interview on March 12.
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Countries around the world are planning releases from strategic oil reserves as the war in the Middle East chokes supply and sends fuel prices soaring. The Strait of Hormuz, a vital waterway for crude tankers, has been all but shut since the start of the conflict. Last week, The International Energy Agency agreed last week to discharge 400 million barrels from emergency oil reserves, its largest-ever release. The US plan is part of that effort.
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Past exchanges from the US emergency reserve have included a 32 million barrel exchange during former President Joe Biden’s administration, which was part of a broader 50-million-barrel release designed to reduce rising fuel costs.
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Read: US to Release 172 Million Barrels of Oil for IEA Relief Plan
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But the method makes the logistics of the withdrawal more complex for potential buyers, Karim Fawaz, an analyst at S&P Global Energy, said in a social media post.
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“At best, it could bog down SPR logistics for more than a year to accommodate refills,” Fawaz wrote. “At worst, it deters potential buyers who may not want to deal with the logistics of committing to large scale returns.”
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