On Thursday, the Trump administration revealed plans to lease space in the country’s emergency petroleum reserve for an initial 30 million barrels of oil.
The plan was an effort to support the struggling crude drillers, taken after the effort to purchase oil for the stockpile was cancelled on the lack of funding. With the decision, the country could alleviate the increasing glut of crude which risks overwhelming commercial storage tank.
According to the Department of Energy (DOE), the lease of space in the US Strategic Petroleum Reserve (SPR) is dedicated for 22.8 million barrels of sweet crude and 7.2 million barrels of sour crude produced domestically.
The DOE estimated the first crude deliveries for SPR lease would be in late April to early May. The lease will receive up to 685,000 bpd. The DOE is working in urgency with the Congress to enable fundings for an SPR purchase.
Analyst Dan Eberhart of Canary LLC commented that it would be more suitable if the DOE just buy the oil while the prices are low to gain profits later when prices rebound, as the companies storing oil in the SPR will have to take the oil back with less premium for the rental.
Meanwhile, the nonpartisan Congressional Research Service said in 2019 that the SPR is more suited for long-term oil storage than short-term leases as frequent brine injection to draw oil from the SPR storage could deteriorate the structure of the caverns.
