US weighs further oil releases from strategic reserve amid price rally

US Energy Secretary Chris Wright indicated on Thursday that Washington could release additional crude oil from the Strategic Petroleum Reserve as soaring near-term prices and supply tightness drive renewed demand for government stocks, according to Argus Media.

Market backwardation

Front-month West Texas Intermediate crude was trading near $101 per barrel, roughly 25% above the price for delivery six months later. This structure — known as backwardation — occurs when near-term prices exceed later delivery rates and can make borrowing from the reserve commercially attractive, Wright noted. "The market right now is saying, 'Hey, maybe we need that oil.' So quite possibly we will respond to that," he told reporters.

Reserve depletion

The Energy Department has already lent more than 130 million barrels, or over three-quarters of the 172-million-barrel drawdown authorized by President Donald Trump in March. Another 3 million barrels are scheduled for release in the coming weeks, leaving approximately 38.5 million barrels unallocated. The continuing drawdown has reduced the Strategic Petroleum Reserve's crude inventories to around 285 million barrels, the lowest level since 1982, according to department figures.

Lending terms

"We had stopped selling because the prices were flat," Wright said, adding that current market conditions mean Washington may finish the original allocation. Under the lending program, companies borrow government-owned crude and later return the oil with an additional premium, with returns expected to begin early next year and continue through 2029. Previous agreements are expected to result in roughly 1.25 barrels returning to the reserve for every barrel borrowed, he stated.