Energy Prospectus

Opening Prices:
> WTI is down 53c to $22.07/Bbl, and Brent is down 94c to $25.40/Bbl.
> Natural gas is down 1.9c to $1.618/MMBtu.

This may be the reason: US suspends plans to buy oil from strategic reserve

CNBC: The U.S. Department of Energy is suspending its plans to buy crude for the nation’s Strategic Petroleum Reserve after the requested $3 billion in funding for the project was left out of the $2 trillion stimulus package. “Given the current uncertainty related to adequate Congressional Appropriations for crude oil purchases associated with the March 19, 2020 solicitation, the Department is withdrawing the solicitation,” an amendment filed Wednesday said. “Should funding become secure for the planned purchases, the Department will reissue the solicitation,” it added. The original request for proposal, filed on March 19, outlined plans to purchase the first 30 million barrels of American-made crude oil for the SPR out of a total of 77 million barrels. But funding to execute the plan was left out of the $2 trillion stimulus package which the White House and Senate agreed to Wednesday night, and which the House is expected to vote on on Friday. Initially $3 billion had been requested for the project. Following the bill’s passage in the Senate, Senate Minority Leader Chuck Schumer said in an email to senators that the revised version of the bill “eliminated [a] $3 billion bailout for big oil.” The Department of Energy is still hoping for some kind of deal. “Small to medium size American energy companies and their employees should be provided the same relief being provided to other parts of our economy, and the Secretary calls on Congress to work with the Administration to fund the President’s request as soon as possible,” Department of Energy spokesperson Shaylyn Hynes said in a statement.
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Forgetting for a second the political BS, wouldn't it be wise for the Federal Government to fill the SPR with super cheap oil and then sell it in the future at a much higher price? IMO the SPR is an important part of our national security plan.

Forgetting for a second the political BS, wouldn't it be wise for the Federal Government to fill the SPR with super cheap oil and then sell it in the future at a much higher price? IMO the SPR is an important part of our national security plan.

Wholeheartedly agree. The energy industry has been extremely hard hit by the demand destruction resulting from the mitigation measures required by governments in an effort to flatten the curve. Demand is not going to return quickly, either. Shut ins are reportedly happening in large numbers. Refineries are cancelling orders. Storage capacity is becoming scarce. Rig count dropping precipitously. Likely even more layoffs (who's left?).

Everyone knows current prices are unsustainable (even for KSA), so at current prices it's just a matter of time before the current inventory build will get worked off, even with reduced demand.

When demand does return, depending on how fast and when, will we have the production capacity needed to prevent a price spike? If there is a price spike, wouldn't that be when we would want the SPR already to be full?

One way to benefit the industry, and, obviously, benefit the taxpayer, would be to buy cheap oil now (which may not stay cheap for long if MBS decides he needs to change his strategy, which some believe he is under increasing pressure to do).

An SPR purchase would be one of the few things the government could do now that would be considered an investment that would return (more) money to the taxpayer. The storage facility is already there, only partially filled. No reason not to fill it to the brim with cheap oil; pretty easy to justify politically, unless the country's agenda is to stamp out carbon emissions a la Green New Deal.