New York — The US government will take advantage of low oil prices and buy "large quantities" of crude to fill the Strategic Petroleum Reserve, President Donald Trump said Friday.
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"We're going to fill it right up to the top, saving the American taxpayer billions and billions of dollars," Trump said during a press conference.
He added that the move was also designed to help the US oil industry, which has been hit by the double-whammy of demand destruction from the coronavirus pandemic and surging supply after the breakup of the OPEC+ agreement between Saudi Arabia and Russia.
"It puts us in a position that's very strong, and we're buying at the right price," Trump said.
Front-month Brent and WTI, which had settled slightly higher day on day, were moved to around 5% above their Thursday settles in aftermarket trading Friday afternoon after Trump's SPR announcement.
Crude futures shot to session highs following the announcement, with front-month Brent hitting $35.95/b and prompt NYMEX WTI topping out at $33.86/b.
At the close of regular market trading at 1830 GMT, NYMEX April WTI had settled up 23 cents at $31.73/b and ICE May Brent was up 63 cents at $33.85/b.
Industry observers question just how much crude can be moved into the SPR caverns, with analysts estimating the fill capacity at less than 500,000 b/d over six to 13 months, according to sources.
Earlier this week, the US Energy Department postponed a planned sale of up to 12 million barrels from the SPR in response to plunging oil prices.
The government stockpile is held in four storage sites along the Gulf Coast. It currently holds 635 million barrels of crude and has an authorized storage capacity of 713.5 million barrels.
That leaves 92 million barrels the government could theoretically buy, but infrastructure constraints limit how much it could move at any given time into its storage sites.
Another complication is the Democrat-controlled House of Representatives would likely block any effort viewed as benefiting the US fossil fuel industry.
The SPR was nearly filled during the George W. Bush administration through a program in which the government accepted oil from producers in lieu of cash royalties for production on federal lands and waters. President Barack Obama's Interior Department ended that royalty-in-kind program in September 2009.
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