Trump to rent storage space to oil producers as demand drops

The Department of Energy will rent space to oil producers to store their surplus crude amid a decrease in demand linked to the coronavirus pandemic. 

The Energy Department said in a statement that it hoped to make 30 million barrels of storage in the Strategic Petroleum Reserve (SPR) immediately available to U.S. producers. 

It plans to make 47 million more barrels of storage available following this initial move, filling the reserve’s remaining capacity. 

“Filling the SPR with crude oil, produced by American companies that are facing catastrophic losses and increased financial hardship, is a logical action for the federal government to take as we work to overcome the economic disruptions caused by COVID-19 and intentional, global oil market disruptions,” Energy Secretary Dan Brouillette said in a statement. 

A department official told The Hill that producers will pay for the storage space in oil instead of dollars.

Bloomberg first reported this week that the Energy Department could rent the space to producers. 

The announcement on Thursday comes after Congress declined to include funding in a coronavirus stimulus package for the Trump administration’s previous plan to purchase 30 million barrels of oil. 

The Energy Department last week withdrew a request to make the purchase. 

Brouillette said in the statement Thursday that the department will keep working with Congress to try to get funding to purchase oil, but in the interim it “must move with a sense of urgency to support an industry that underpins the U.S. economy and supports our national security.”

Assistant Secretary for Fossil Energy Steven Winberg said in the statement that the first deliveries to the SPR are expected for late April or early May and that the facility will be able to receive as much as 685,000 barrels per day.

Oil prices fell to about $25 per barrel on Thursday afternoon, down from a high of $53 in February, amid a decrease in demand linked to the coronavirus and production increases from Saudi Arabia and Russia. 

President Trump is expected to meet with oil producers in the coming days. He also said on Thursday that he expects Russia and Saudi Arabia to cut their production, although Russia pushed back on his assertion. 

Updated at 1:01 p.m.