Why US is releasing 4M barrels from strategic oil reserves
What's the story
The United States has authorized the release of up to four million barrels of crude oil from its Strategic Petroleum Reserve (SPR). The move is aimed at offsetting supply disruptions caused by Hurricane Isaias in the southeastern region of the country. As part of this "emergency exchange," ExxonMobil and BP American can each receive up to two million barrels to help maintain their refinery operations.
Replenishment terms
ExxonMobil, BP American must return borrowed crude by 2027
The Energy Department has stipulated that ExxonMobil and BP American will have to return the borrowed crude to the SPR by 2027.
They will also have to pay a "premium" amount over and above what they borrowed.
This agreement is part of the US government's efforts to ensure that its strategic reserves are not depleted beyond a certain point due to natural disasters or other emergencies.
Production impact
Hurricane Isaias disrupts oil production in US Gulf Coast region
Hurricane Isaias, which made landfall in Florida on Friday as a Category 2 hurricane, has severely disrupted oil production in the US Gulf Coast region.
The SPR has already been tapped since the US war with Iran shocked energy markets, with its backstock reaching its lowest level since 1982.
Since late February when the US and Israel struck Iran, a total of 132 million barrels have been withdrawn from the reserve of 415 million barrels.