DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied 4% on Wednesday after U.S. President Joe Biden called on domestic producers to increase crude output by reassuring the industry the U.S. government would buy back oil from them to replenish the Strategic Petroleum Reserve that has been drawn down by more than 167 million barrels (bbl) since Biden took office.

In a speech from the White House Wednesday afternoon, Biden confirmed the Department of Energy issued a notice to sell 15 million bbl of crude oil from the SPR today, which is the last batch of crude to be released from emergency reserves following his March 31 pledge to disburse 180 million bbl of SPR crude oil. Crude sold in response to Wednesday's DOE sales notice will be dispersed in December. The release of crude oil from the nation's emergency stocks was the largest on record, aimed at stabilizing the market following Russia's invasion of Ukraine.

Biden did not pledge further SPR releases over the winter months as some speculated but cautioned that his administration stands ready to take such action if market conditions warrant.

"With my announcement today, we're going to stabilize markets and decrease prices, at a time when the actions of other countries have caused such volatility. We call it the 'ready-and-release plan.' This allows us to move quickly to prevent oil-price spikes and respond to international events," Biden said.

The DOE also finalized a rule allowing fixed-price forward purchases of crude oil for the SPR that amending procedures for acquiring crude for the SPR set by the Energy Policy Act of 2005.

In the rule DOE said, "Relative to conventional purchase contracts that expose producers to volatile crude prices, the fixed-price contracts can give producers the assurance to make investments today, knowing that the price they receive when they sell to the SPR will be locked in place, providing them with some protection against downward movements in the market."

The White House late Tuesday issued a fact sheet ahead of Wednesday's SPR sales announcement, which stated the Biden administration's commitment "to replenishing the SPR, which is an important national security asset."

The Biden administration said it intends to repurchase crude oil for the SPR when the price of West Texas Intermediate is at or below about $67 to $72 per bbl. Initial repurchases are for delivery in 2024 or 2025.

The pledge to buy back crude oil at a later date with a fixed price that sets a floor for producers spurred gains in WTI and Brent futures.

At settlement, NYMEX November WTI futures advanced $2.73 to $85.55 per bbl, with next-month December futures finishing the session with a $1.03-per-bbl discount to the expiring contract. ICE December Brent futures added $2.38 to $92.41 per bbl. NYMEX November ULSD futures retreated 8.92 cents to $3.9043 per gallon, and November RBOB futures rallied 10.16 cents to $2.6522 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges can be reached at liubov.georges@dtn.com