Page 10 - NorthAmOil Week 10

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US suspends SPR sale as lobbyists push to add cheap barrels to reserve
The DoE had planned to sell up to 12mn barrels of sour crude from the SPR this week.
US
THE US Department of Energy (DoE) has sus- pended a planned sale this week of up to 12mn barrels of crude from the country’s Strategic Petroleum Reserve (SPR). The move has been attributed to the collapse of global crude prices in the wake of the failure of OPEC+ to reach a deal on cutting production, which has led to an escalating oil price war between Russia and Saudi Arabia. The price war is seen by some as an attempt to capture market share from the US.
“The sale was designed to raise revenue for SPR facility maintenance and upgrades. Given current oil markets, this is not the optimal time for the sale,” a DoE spokesperson, Jess Szyman- ski, said in a statement.
The suspension of the sale helped boost the value of Mars crude on March 10 after it fell sharply the previous day, but had little impact on futures prices. And Mars still traded below the year-to-date average.
The sale had been announced on February 28, with the DoE planning to draw down and sell sour crude from three SPR sites – Bryan Mound and Big Hill in Texas and West Hackberry in Louisiana. The department has not disclosed when it might reschedule the sale.
Urging to replenish
Separately, some lobbyists have been pushing the DoE to take advantage of the oil price crash by buying up cheap barrels, Bloomberg reported, citing three sources familiar with the matter.
The proposal involves the US government taking at least 78mn barrels off the global mar- ket, which could result in at least a modest
increase in prices. However, such a move would mark a significant shift in the way the govern- ment has previously relied on the SPR, and it is not known whether the administration of US President Donald Trump is giving it seri- ous consideration. Traditionally, oil has been released from the reserve, rather than added to it, in times of emergency. And the government has also used the SPR to fund unrelated pro- grammes, such as a sweeping tax cut introduced by Trump in 2017.
However, according to Bloomberg’s sources, the idea has at least been advanced by some industry representatives and is under discussion.
Bloomberg cited two other sources as saying
that Trump administration officials are seri- released from the
ously considering a separate idea to help some
oil companies by lowering royalty rates for oil
and gas produced on federal land. These rates
are currently set at 12.5%. The size and duration
of the reduction under consideration by the
administration was not immediately clear, but
it is likely to be opposed in the Democrat-con- emergency. trolled Congress, where royalty rates have been
criticised for being too low. Indeed, even some Republicans have joined forces with the Dem- ocrats to advance legislation that would raise royalties and other payments for producers on federal land.
Other ideas that would aid producers dur- ing this period of market turmoil are reportedly also being explored, and the coming days and weeks are expected to bring more clarity on the response at a federal level.™
Traditionally, oil has been
reserve, rather than added to it, in times of
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w w w . N E W S B A S E . c o m Week 10 12•March•2020