The U.S. Department of Energy said on Thursday it would buy up to 30 million barrels of crude oil for the Strategic Petroleum Reserve by the end of June.
This is the 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, the Energy Department said.
The department “appears to be setting up multiple pathways to fulfill 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,” they added.
Some of the funding for a full 77 million barrel purchase would have to be mandated by new stimulus legislation.
The Energy Department said it was working with Congress to finalise funding, which could run about 2 billion dollars or more for the full purchase.
Secretary of the Treasury Steven Mnuchin said on Fox Business he would tell Trump to take advantage of low oil prices and ask Congress for 10 billion dollars to 20 billion dollars to fill up the SPR for the long term.
“We should be filling up the reserve for the next 10 years,” Mnuchin said.
An environmental group criticised 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 Centre for Biological Diversity.
U.S. oil prices CLc1 rose about 12 per cent on Thursday to nearly 23 dollars 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.
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.
“The SPR will help relieve oil-related disruptions to our economy,” said Steven Winberg, Assistant Secretary for Fossil Energy at the department.