The US Department of Energy announced the awarding of contracts for the supply of about 3.1 million barrels of crude oil to five American companies in order to replenish the US strategic stockpile , and also announced a tender for the supply of another three million barrels in September, provided that the US Department of energy receives tender offers in the fall, by the 20th of this month, and its contracts are awarded before the end of this month.

Edited  by |ANNA sam

 Economic section -  CJ journalist

Washington - June,11,2023

The US administration of President Joe Biden decided last year to withdraw from the stockpile in unprecedented quantities and sell them on the market in order to sharply increase supply to put pressure on prices down, and this deliberate intervention in the energy markets led to the reduction of the US strategic stockpile to the lowest levels since 1983.

As a result of the US administration selling 180 million barrels of its strategic stockpile in 2022, the volume of strategic stockpiles reached about 372 million barrels of crude oil.

This has alarmed Republicans in the United States, as inventories have become too low to cover 20 days of us consumption, which puts them at risk in the event of any sudden oil shortage crisis in the market, and this also provoked criticism of US intervention in the energy market, undermining the efforts of major producers and the "OPEC+" alliance to ensure market stability.

The release of oil from strategic stocks to the market to reduce prices was considered a "politicization" of the energy market, as the Biden administration resorted to this after the war in Ukraine in the context of Russia's economic strangulation.

The US administration may find an argument now in response to these criticisms, especially from the Republican opposition, that there is a price difference between the sale price of the inventory last year and the purchase price now to compensate for what was withdrawn, what was withdrawn from the strategic inventory last year was sold at a price of 95 dollars per barrel, while the purchase is now at a price of 73 dollars per barrel, and the US administration says that the price difference is in favor of the American taxpayer.

The US administration has already announced that it will not start buying oil to replenish the strategic stockpile until prices reach a level below 72 dollars per barrel. At the end of the week, the price of us light crude (West Texas blend) reached about 70 dollars per barrel, despite the confirmation of the "OPEC+" alliance to reduce production at the ministerial meeting at OPEC headquarters in Vienna last weekend until the end of next year 2024.

The US purchase to replenish stocks may not have much effect on the market, but the withdrawal of more than six million barrels per day from the supply on the world market is enough to keep prices from collapsing below the 70-dollar-a-barrel barrier, as most market analysts believe.

The markets were expecting that the meeting of the "OPEC+" alliance this month will decide to reduce the production ceiling further to absorb the increase in supply with the likelihood of continued decline in global demand for oil.

Some sources estimated that the supply and demand equation tends to increase supply by about two million barrels per day, and Saudi Arabia's decision to voluntarily reduce its production by about one million barrels per day had an important impact on maintaining the balance.

Another factor that may slightly change the balance of the oil market is that shale oil production in the United States may not fully recover in the second half of this year, according to "Forbes" magazine, the number of shale oil production platforms in North America decreased by 20 percent from the highest level reached in mid-January.

Although the U.S. Energy Information Administration raised its estimate for U.S. production for the current year this week from 12.5 million barrels per day to 12.6 million barrels per day, the magazine's report calls into question the possibility of achieving this.

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