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U.S. oil companies have started sending oil to the Strategic Petroleum Reserve, Bloomberg reports, citing a Department of Energy official.
According to the official, since the start of April, some 1.1 million barrels of crude have been sent into the SPR after the federal government finalized negotiations with nine companies for leasing SPR space for them to store their crude in.
The talks for the lease of 23 million barrels worth of space began earlier this month, amid fast-falling prices that tanked deep below zero on April 20. Since then, West Texas Intermediate has recovered above zero but has been unable to sustain a level of above $20 a barrel. After yesterday the United States Oil Fund said it would sell all its WTI futures contracts for June delivery within four days, WTI again slid lower, trading at $11.11 a barrel at the time of writing. Brent traded at $19.20 a barrel, down by close to 4 percent while WTI was down by almost 13 percent.
It was a massive selloff to avoid physical delivery that brought about negative WTI prices this month. The selloff could repeat as storage space runs out, both onshore and offshore. Vessel demand data from Signal Group shows a marked increase in demand for Very Large Crude Carriers—the ones that can hold up to 2 million barrels of crude.
But space is running out both in terms of tankers and in terms of tanks onshore. Besides, SPR, the central storage hub in Cushing, Oklahoma, is reportedly soon to reach its limit, according to a Reuters report. The report cited traders as saying despite official data putting the Cushing occupancy rate at 70 percent, the rest has already been booked by oil companies looking for storage space. The hub has a capacity for 76 million barrels. As of April 17, it held 53 million barrels.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.