US aims to lease out space in emergency oil stockpile
We appreciate any actions administration is taking to alleviate the oversupply flooding the market and allow US independent producers to continue to operate
NEW YORK/WASHINGTON: The Trump administration plans to lease out space for energy companies to store oil in the nation’s Strategic Petroleum Reserve, after a previous effort to buy millions of barrels for the emergency stockpile was cancelled over a lack of funding, according to two people briefed on the matter. The plan could be announced as early as Wednesday.
The new plan could help the United States deal with a growing glut of crude oil that risks overwhelming commercial storage tanks and sending world energy prices deeper into a tailspin as the coronavirus pandemic slashes demand for fuel.
The plan is a change of tack from the initial scheme, which would have had the Department of Energy (DOE) purchase crude
ANNE BRADBURY, CEO of AXPC
from domestic drillers using federal funds.
US President Donald Trump ordered the DOE on March 13 to fill the reserve “to the top” to help oil producers suffering from the global oil price drop, and the initial solicitation asked for supply only from US companies with fewer than 5,000 employees.
But Congress did not approve funds for the buys, forcing the energy department last week to cancel the proposal.
The revised plan would help traders and others as they try to ride out a precipitous drop in the price of oil by storing crude for sale later once the crisis is over.
The country’s main commercial storage hub in Cushing, Oklahoma is quickly filling up.
The Strategic Petroleum Reserve has 77 million barrels of free capacity, a little less than the country uses in four days.
It currently holds about 635 million barrels of oil in salt caverns on the Texas and Louisiana coasts. It was not clear if the DOE has ever before leased space in the caverns to private companies. “We encourage Congress to work with DOE to ensure they have the resources needed for SPR flexibilities, to address the oversupply issues we are facing,” said Anne Bradbury, the CEO of AXPC, an industry group representing independent oil and gas companies.