The U.S. Department of Energy said on Thursday it will buy 30 million barrels of oil for the Strategic Petroleum Reserve as an initial step to fulfill President Donald Trump’s directive to fill the reserve to help domestic crude producers, APA reports citing Reuters.
The reserve, in caverns on the Texas and Louisiana coasts, has the capacity for an additional 77 million barrels. The solicitation for the first 30 million barrels will be for both sweet and sour crude oil and is focused on buying from small and midsize producers, the Energy Department said.
The Energy Department will buy up to 11.3 million barrels of sweet crude and up to 18.7 million barrels of sour crude. The delivery date is from May 1 to June 30 and proposals are due by March 26, the department said.
Some of the funding for a full 77 million barrel purchase would have to be mandated by new legislation. The Energy Department said it is working with Congress to finalize the funding to support the full purchase, which could run about $2 billion or more, depending on prices.
Oil prices rose nearly 3% on Thursday after a three-day sell-off sparked by the spread of the coronavirus and a price war between Saudi Arabia and Russia drove them to their lowest in almost two decades.
The Energy Department said the reserve can receive up to 685,000 barrels per day of crude. “With its extensive storage, pipeline, and marine infrastructure along the Gulf Coast, the SPR will help relieve oil-related disruptions to our economy,” said Steven Winberg, assistant secretary for fossil energy at the department.