U.S. Energy Department Allows Access to Strategic Petroleum Reserve Storage for Surplus Crude Amid Falling Demand

The U.S. Energy Department on April 2 announced a solicitation to make 30 million barrels of the Strategic Petroleum Reserve’s storage capacity available to oil producers amid an unprecedented drop in demand caused by the COVID-19 economic impacts, as well as the intentional disruption of oil markets by foreign actors. The agency said that a lack of storage is forcing premature shut-in of oil wells and economically hurting the U.S. energy industry.

The first crude deliveries are anticipated in late-April or early-May depending on producer logistics. The reserve will be prepared to receive up to 685,000 barrels per day. At a time when oil producers are struggling with economic losses, the department said the SPR is well-positioned to relieve some of the economic stress by making storage capacity available immediately. The reduction in worldwide demand has forced refiners to dial back production of gasoline and other refined products, resulting in reduced refinery crude oil demand, a market glut of globally-produced oil, and increased need for storage.

President Trump has directed the agency to fill the reserve its maximum capacity. The department is working with Congress to find ways to make funding available to buy American oil. Following the initial solicitation, the agency plans to allow access to an additional 47 million barrels of storage.

Industry groups including the American Petroleum Institute, Louisiana Oil & Gas Association, Permian Basin Petroleum Association, Petroleum Equipment & Services Association, and Texas Alliance of Energy Producers welcomed the move.