US Energy Secretary Eyes More Oil Loans Amid Crude Price Surge
US Energy Secretary Chris Wright hinted at lending more oil from the country's Strategic Petroleum Reserve as crude prices surge. The recent price increase has made another round of loans a 'very real possibility' under the ongoing 172-million-barrel drawdown authorized by President Donald Trump in March, according to Wright.
The Energy Department has already lent over 130 million barrels, or more than three-quarters of the authorized drawdown. With front-month West Texas Intermediate crude trading near $101 per barrel, a 25% increase from the price of crude for delivery six months later, the market is pulling for borrowing oil from the reserve.
The structure known as backwardation occurs when near-term crude prices exceed those for later delivery, making borrowing oil from the reserve commercially attractive. Under the program, companies borrow government-owned crude and return it with an additional premium, resulting in roughly 1.25 barrels returned to the reserve for every barrel borrowed.