The Trump administration Sep. 29 said it would put another 40 million bbl of crude from the Strategic Petroleum Reserve (SPR) into the market even as the emergency stockpile has fallen to its lowest level in more than four decades, raising fresh questions about how much of a buffer remains should another major supply disruption occur.

The SPR held 283.8 million bbl as of the week ended Sept. 25.

If companies take all 40 million bbl before they return replacement crude, the SPR's physical inventory would temporarily fall to about 244 million bbl, before accounting for other inventory changes. That would put the stockpile below the 252-million-bbl statutory threshold that applies to certain limited SPR drawdowns. The threshold does not apply to the Department of Energy (DOE)’s exchange authority.

SPR risks, exchange demand uncertain

The Government Accountability Office (GAO) in May warned that the SPR's ability to meet future drawdown and fill demands faced risks from aging infrastructure, maintenance backlogs, and low inventory levels.

"The SPR's operational capability is at risk,” the report noted, saying that as of last December, when inventories were over 410 million bbl, the SPR could withdraw oil at only 61% of its design rate and refill the reserve at 56% of its design rate. More than a quarter of the inventory was unavailable for drawdown at the time because of construction and cavern outages.

GAO also warned that additional inventory declines from emergency releases could further limit the SPR's drawdown capability.

There is no guarantee that companies will take all 40 million barrels offered under the latest exchange. DOE offered the same amount in June, but only one company agreed to borrow about 500,000 bbl. The limited interest followed concerns among oil traders that the exchange's repayment premiums and crude-quality requirements could make the SPR oil less attractive.

DOE's latest exchange calls for deliveries in November and December from the SPR's two Texas storage sites, Bryan Mound and Big Hill. Companies must submit bids by Oct. 6, and the contracts will establish the schedule for returning the crude.

The transaction forms part of a broader US commitment to release 172 million bbl from the SPR as part of a coordinated 400-million-bbl release by International Energy Agency (IEA) member countries.

DOE said its five previous solicitations awarded more than 133 million bbl across four completed exchanges. The exchanges will return crude to the SPR with a 25% premium, according to DOE.

Energy Secretary Chris Wright criticized European IEA members for releasing only a fraction of the crude oil and petroleum products they had pledged as part of the coordinated release.

"While the United States and Japan are delivering on their commitments, several European member countries have released only a fraction of the crude oil and petroleum products they pledged," Wright said. "We urge every member country to fulfill its commitments."

DOE said the exchange program will save taxpayers more than $3 billion while replenishing the SPR with additional crude through the premium payments.