WASHINGTON – The U.S. Energy Department said Friday it will not sign contracts with energy companies to deliver up to 13 million barrels of crude oil to the Strategic Petroleum Reserve.
The department's decision comes after Congress this week approved legislation ordering the Bush administration to stop putting oil into the emergency stockpile until crude prices fall below $75 per barrel.
On the New York Mercantile Exchange, crude oil futures for June delivery were fetching $126.11 per barrel in afternoon trading after hitting a record high $127.82 earlier in the day.
The department had received bids this week to exchange millions of barrels of oil that was turned over to the government as royalties for drilling on federal leases for better qualities of crude from energy companies that would have gone into the reserve.
The department said it will not sign contracts for that oil, which would have been delivered to the reserve at a rate of 76,000 barrels a day from August through December.
Separately, the department said it would not buy $584 million worth of oil this year for the stockpile if the legislation becomes law, as is expected. Those oil purchases would have helped to replace some of the crude the government sold from the reserve to refineries after Hurricane Katrina disrupted supplies after hitting the Gulf Coast and flooding New Orleans in late August 2005.
The department also said it will defer 7.9 million barrels of oil already scheduled to be delivered to the stockpile during May, June and July, again if the legislation becomes law. The White House has said it will not veto the legislation, though the Bush administration had opposed halting oil shipments to the stockpile.
Congress wants the oil earmarked for the reserve to instead be put in the market to help lower record oil and gasoline prices. The administration for months had rejected calls from lawmakers to stop oil deliveries to the stockpile, saying the volumes were too small to affect prices.
(Reporting by Tom Doggett)
