WASHINGTON—The U.S. Department of Energy said on March 19 it will buy up to 30 million barrels of crude oil for the Strategic Petroleum Reserve by the end of June as a first step in fulfilling President Donald Trump’s directive to fill the emergency stockpile to help domestic crude producers.
The reserve, in caverns on the Texas and Louisiana coasts, has 77 million barrels of available capacity. The first 30 million barrel purchase will be for both sweet and sour crude oil and will focus on buying from small and midsize producers with fewer than 5,000 employees, the Energy Department said.
The funding for the full 77 million barrel purchase would have to be mandated by new stimulus legislation. Energy Secretary Dan Brouillette told reporters in a teleconference that the department has asked Congress for about $3 billion.
Brouillette also said a second round of purchases for the reserve could occur in 60 to 90 days. “We’re moving out as fast as we can possibly move out,” Brouillette said.
The department “appears to be setting up multiple pathways to fulfill President Donald Trump’s request to fill the SPR, contingent upon future funding,” analysts at ClearView Energy Partners said in a note to clients. “We view today’s action as a necessary step towards an SPR fill, but not sufficient in its own right.”
Treasury Secretary Steven Mnuchin said on Fox Business he would tell Trump to take advantage of low oil prices and ask Congress for $10 billion to $20 billion to fill up the SPR for the long term. “We should be filling up the reserve for the next 10 years,” Mnuchin said. Brouillette said he had not yet talked to Mnuchin about that plan, but would soon.
An environmental group criticized the administration’s focus on oil. “People are suffering and dying, but all Trump and Mnuchin care about is keeping the fossil fuel industry rich while our planet’s climate unravels and a global pandemic rages,” said Brett Hartl, of the Center for Biological Diversity.
U.S. oil prices rose about 12% on March 19 to nearly $23 a barrel after a three-day sell-off sparked by the spread of the coronavirus and a price war between Saudi Arabia and Russia drove them to their lowest in almost two decades.
Sweet And Sour
The department will buy up to 11.3 million barrels of sweet crude and up to 18.7 million barrels of sour crude. The delivery date is from May 1 to June 30 and proposals are due by March 26, it said.
The reserve can receive up to 685,000 barrels per day of crude, the Energy Department said.
Denbury Resources and Penn Virginia mutually agreed to terminate their merger after the $1.7 billion cash-and-stock transaction faced difficult market conditions and shareholder opposition.
Murphy Oil plans to use proceeds from its Malaysia exit to PTTEP for share buybacks as well as funding Eagle Ford Shale and U.S. Gulf of Mexico operations.
Equinor entered the Eagle Ford asset at the height of the U.S. shale boom in 2010 through a 50/50 JV acquisition with Talisman Energy, now owned by Repsol.