The Trump administration is pleased with initial results of its actions to secure crude oil for the national stockpile while easing storage pressures on the struggling oil companies, and might conduct similar operations in the near future, Energy Secretary Dan Brouillette said Thursday.
Speaking during a virtual meeting of the Secretary of Energy Advisory Board, he also voiced his hope that this will be the low point in oil price levels, adding that he is pleased to see “at least some movement that was in the right direction” in recent days.
Oil prices had plunged as the demand destruction wrought by the pandemic and economic lockdowns was exacerbated by the Russia and Saudi Arabia flooding the market – before production cuts were agreed to at an OPEC-plus meeting in early April.
Brouillette touted the reductions already implemented by Russia and the Saudis, which – in combination with some eventual rebound in demand – should help stabilise the oil market and provide an opportunity for the US energy sector to recover.
It is very important that the US oil and gas industry returns to pre-pandemic levels, he said, and maintain “the independence we were achieving pre-pandemic”.
The supply glut also sparked a severe scarcity of storage options, prompting the DOE, at the direction of President Trump, to negotiate contracts with small and medium-sized US companies to store their crude oil in the Strategic Petroleum Reserve.
In addition to relieving the storage crunch, Brouillette said the federal government also wanted to take advantage of cheap oil prices on behalf of the taxpayer to fill the SPR. “We are now under contract for approximately 23 million barrels of oil,” he said.
One-third of that amount has been delivered to the SPR as of this week, he continued, and the rest will be received through June of 2020.
The administration is very pleased with the results of the transaction, and the DOE may consider returning to the markets “very shortly” again, Brouillette said.
To complement this initiative, the DOE released a ‘Request for Proposal’ to purchase up to one million barrels of sweet crude oil to test current conditions of physical crude oil available to the SPR. The oil is for delivery during July with early deliveries accepted in June.
“That RFP will be concluded here very shortly within the next few days, so we are going to continue that process,” Brouillette said, because it bolsters the country’s energy security and also provides the industry with relief from the present “acute” storage shortage.