The US Department of Energy said it will start purchasing crude oil for its strategic petroleum reserve (SPR) to test the oil market and see how it will help domestic crude producers in the current low price environment.
Initially, up to 1 million barrels of sweet crude oil will be purchased to test the oil market, the department said in a statement on Thursday, adding the oil is for delivery to the SPR during July with early deliveries accepted in June.
The department said it will purchase crude oil from small- to mid-size oil producers in the US, and oil deliveries will be made to one or more of three SPR storage sites located in the states of Texas and Louisiana based on bidder preference and scheduling logistics.
"This crude oil purchase will serve as a test of the current conditions of physical crude oil available to the SPR, as opposed to the financial market trading WTI NYMEX futures contracts," the statement said.
"This purchase complements deliveries of crude currently scheduled for June or July under Department of Energy's crude oil storage initiative, which was launched in April," it added.
The move comes after US President Donald Trump ordered Energy Secretary Dan Brouillette in March to fill the SPR, and the department tried to find funding to buy a total of 77 million barrels.
The US had 639.8 million barrels of oil in its SPR as of week ending May 8, according to the country's Energy Information Administration (EIA) data.
By Ovunc Kutlu