DOE trying to ease burden on oil producers

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FILE – In this June 11, 2019, photo a pump jack operates in an oil field in the Permian Basin in Texas. The world may be heading into an oversupply of oil, and that possibility is hanging over members of the OPEC cartel, which will meet later this week to decide whether to further cut production to boost prices. (Jacob Ford/Odessa American via AP, File)

WASHINGTON (Big 2/Fox 24) – The Department of Energy announced a plan to try and ease the burden on oil and gas producers amid the downturn and COVID-19 outbreak.

The DOE says a plan is in place to fill the Strategic Petroleum Reserve to its maximum capacity by purchasing 77 million barrels of American-made crude oil. Additionally, the DOE announced Thursday they will also purchase an initial 30 million barrels to begin filling the SPR.

“DOE is moving quickly to support U.S. oil producers facing potentially catastrophic losses from the impacts of COVID-19 and the intentional disruption to world oil markets by foreign actors,” said U.S. Energy Secretary Dan Brouillette. 

The focus will be on small to mid-sized producers, according to the release. The plan calls for the delivery to be in May and June.

“77 million barrels that will go back into the ground, into the reserve. President Trump has been selling that oil over time at higher prices. So, it’s a good move for the American taxpayer and it helps us in the energy industry because it supports the U.S. oil price,” said President Mickey Cargile of Cargile Investment Management.

DOE officials say they are working with Congress to finalize the funding to support the purchase.

According to Cargile, the Strategic Reserve can buy under 900,000 barrels a day. He expect it to last into the summer months and hopefully past the coronavirus outbreak.

“The SPR is mission-ready to receive up to 685,000 barrels per day,” explained Assistant Secretary for Fossil Energy, Steven Winberg. “With its extensive storage, pipeline, and marine infrastructure along the Gulf Coast, the SPR will help relieve oil-related disruptions to our economy.”

The plan will come as good news to oil and gas producers who have been navigating a downturn, which was compounded by the Coronavirus.

Oil prices have dropped below $30 per barrel in recent weeks and currently sits just over $24 per barrel on Thursday.

“Yesterday we saw a record fall in oil prices. Temporarily falling below $20. Today we have the biggest ‘up-day’ ever in prices, up a little more than 5% and in one day we are back to about $26 per barrel,” says Cargile.

Cargile believes the price is trying to form a base at around $20. He says it all depends on how long we linger into the coronavirus outbreak and for demand to pick up.

According to Bloomberg, the oil price closed out at $25 on Thursday.


The full release from the Department of Energy can be found below:

DEPARTMENT OF ENERGY EXECUTES ON DIRECTION OF PRESIDENT TRUMP, ANNOUNCES SOLICITATION TO PURCHASE CRUDE OIL FOR THE SPR TO PROVIDE RELIEF TO AMERICAN ENERGY INDUSTRY

WASHINGTON, D.C. – At the direction of the President of the United States, Donald J. Trump, the Department of Energy (DOE) will fill the Strategic Petroleum Reserve (SPR) to its maximum capacity by purchasing 77 million barrels of American-made crude oil. Today, DOE announced a solicitation for the purchase of an initial 30 million barrels to begin filling the SPR. Solicitations for additional purchases will follow.

“DOE is moving quickly to support U.S. oil producers facing potentially catastrophic losses from the impacts of COVID-19 and the intentional disruption to world oil markets by foreign actors,” said U.S. Energy Secretary Dan Brouillette. 

Under this initial solicitation, DOE will purchase up to 30 million barrels of sweet and sour crude oil with a focus on small to midsize U.S. oil producers. 

“The small to midsize oil producers, which are the focus of the initial crude oil purchase, employ thousands of Americans,” said Under Secretary of Energy Mark W. Menezes. “These businesses have been particularly hard hit by recent events but under President Trump’s leadership, we are taking swift action to assist hard hit producers and deliver strong returns to the taxpayer.”

Today’s solicitation is the first step toward filling the SPR to its maximum capacity.  The Department is working with Congress to finalize the funding to support the purchase of the full 77 million barrels of oil, consistent with the President’s directive.

“The SPR is mission-ready to receive up to 685,000 barrels per day,” explained Assistant Secretary for Fossil Energy, Steven Winberg. “With its extensive storage, pipeline, and marine infrastructure along the Gulf Coast, the SPR will help relieve oil-related disruptions to our economy.”

Recognizing the private sector needs time to plan for delivery logistics, the solicitation is for crude oil to be delivered in May and June; although, early April deliveries are encouraged.

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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