March 13, 2020 / 8:27 PM / a month ago

UPDATE 3-U.S. to fill strategic oil reserve 'to the top,' Trump says

(Adds industry comment, details)

By Timothy Gardner and Humeyra Pamuk

WASHINGTON, March 13 (Reuters) - President Donald Trump said on Friday that the United States would take advantage of low oil prices and fill the nation’s emergency crude oil reserve, in a move aimed to help energy producers struggling from the price plunge.

“Based on the prices of oil, I’ve ... instructed the secretary of energy to purchase, at a very good price, large quantities of crude oil for storage in the U.S. strategic reserve,” Trump, a Republican, told reporters at the White House. “We’re going to fill it right up to the top,” he added without offering details.

The Strategic Petroleum Reserve has the capacity to store up to an additional 77 million barrels of oil, a Department of Energy official said, after Trump spoke. The official did not immediately comment on how fast the oil would be purchased for the reserve which currently holds 635 million barrels.

It was the first move by a president to fill the SPR since President George W. Bush, a Republican, ordered a fill to capacity in the wake of the Sept 11, 2001 attacks.

Oil prices posted the worst week in more than a decade, collapsing to about $31 a barrel on a rare combination of severe shocks to both supply and demand. The spread of coronavirus has hit demand by shutting travel around the world. Meanwhile, the launch of a price war between Saudi Arabia and Russia over the weekend has flooded global markets with crude.

Analysts were divided about the move, with one calling it an “unambiguously smart step.” “Better to do it before an emergency,” said Bob McNally, the president of the Rapidan Group consultancy. “We still need a large SPR because our economy remains vulnerable to price shocks from disruptions anywhere,” said McNally, who was a White House energy adviser at the national security council under Bush.

Daniel Yergin, an energy historian who advises U.S. officials on energy matters, told reporters at the Energy Department late Thursday he was skeptical that buying oil for the reserve could quickly help energy producers.

“I don’t see how you can use the SPR,” he said. “With the amount of oil coming into market this is really going to lead to swollen inventories, it’s going to take a long time to bring down.”

McNally agreed it could take a while, even years, to fill the reserve, and added he did not know how the Trump administration would pay for it.

Former Secretary of State Henry Kissinger pushed for the creation of the SPR in 1975, after the Arab oil embargo spiked gasoline prices and damaged the U.S. economy. It is held in a series of caverns along the Texas and Louisiana coasts.

An oil and gas industry group welcomed Trump’s directive. Anne Bradbury, chief executive of the American Exploration and Production Council, said it could “help alleviate the oversupply disruptions in the marketplace.”

An environmentalist said Trump was putting energy companies first. It is “wildly inappropriate” for Trump to use the SPR “as a tool to prop up the oil and gas industry at a time when the White House should be focusing on how to help everyday people,” said Alex Doukas, of Oil Change International. (Reporting by Timothy Gardner, Humeyra Pamuk and Jeff Mason in Washington; Writing by Tim Ahmann; Editing by Leslie Adler, Matthew Lewis, Diane Craft and Daniel Wallis)

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