The U.S. Department of Energy is negotiating contracts with nine U.S. oil producers to store a total of 23 million barrels of their produced oil in the Strategic Petroleum Reserve (SPR), to help U.S. oil producers with storage availability amid the huge demand loss in the pandemic, DOE said on Tuesday.
U.S. oil producers are currently suffering from the lowest oil prices in years, with the benchmark WTI Crude in the low $20s despite this weekend's historic global oil deal for which U.S. President Donald Trump is also taking credit.
The initial idea of the U.S. Administration to help the U.S. oil patch was to buy 77 million barrels of oil from American producers to remove some of the overhang in the market, fill the SPR to its maximum capacity with the cheapest oil in years, and help oil producers.
After the plan failed to get funding for oil included the $2 trillion stimulus package, the DOE announced on April 2 that it would "immediately make 30 million barrels of the Strategic Petroleum Reserve's (SPR's) oil storage capacity available to U.S. oil producers that are struggling with catastrophic financial losses due to the combined impacts of COVID-19 and the intentional disruption of world oil markets by foreign actors."
The awards negotiations announced by the DOE today will be for around 23 million barrels of crude oil storage across all four SPR sites. Most of the crude oil deliveries will be received in May and June 2020, with possible early deliveries in April, DOE said.
"When producing oil you have two options - you either use it or you store it. With the impacts caused by the COVID-19 pandemic, we are seeing an enormous decrease in demand as our country works to contain the virus," U.S. Secretary of Energy Dan Brouillette said in a statement.
"This is why making storage capacity available in the SPR is so important. Providing our storage for these U.S. companies will help alleviate some of the stress on the American energy industry and its incredible workforce."
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More