Deal in Congress Axes Funding to Fill SPR with US Crudes

by Meghan Gordon and Brian Scheid (S&P Global Platts) Trump administration sought $3 billion to buy US crudes; Analyst sees market hit from US failing to take 'no-brainer policy' -- The Trump administration's plan to fill the US Strategic Petroleum Reserve with 77 million barrels of medium and heavy crudes appears to be on hold after Congressional leaders removed funding for it from a contentious coronavirus aid package.

The $3 billion requested by the Trump administration to buy US-origin crudes could still be added to future coronavirus stimulus legislation.

A spokesman for Senator Chuck Schumer, Democrat-New York, confirmed early Wednesday that the final deal reached overnight removed the SPR funding.

The government stockpiles represent the equivalent of about 8% of currently available commercial crude storage, according to Bob McNally, president of Rapidan Energy Group. The consultancy expects crude and product storage to be full by the end of summer, if not earlier.

The Department of Energy took the first step Thursday in seeking 77 million barrels of medium and heavy sour crudes to fill the SPR while prices are low, but it cannot move forward without Congressional funding. Energy Secretary Dan Brouillette said the administration asked Congress for $3 billion to account for potentially higher crude prices in the coming months.

Brouillette said in an interview Thursday that he had no doubt Congress would approve the funding. READ MORE

Excerpt from Politico's Morning Energy: OIL'S WHITE HOUSE MEETING: Trump will meet with oil company executives at the White House this afternoon to discuss how to address the drop in crude oil prices driven by the coronavirus and the price war between Saudi Arabia and Russia.

The guest list: The meeting is expected to include Harold Hamm, a Trump donor and the founder of Continental Resources, who has accused the Saudis of "dumping" oil on the market and has called for import restrictions. It will also include chief executives from Exxon Mobil, Chevron and other large multinational companies that have argued that no direct relief to the oil industry is needed, as Pro's Ben Lefebvre reports.

The tweet: The meeting comes a day after the president's tweet that he expected a deal soon between Saudis and Russians to sharply cut oil production by 10 million to 15 million barrels — though that turned out to be more wishful thinking than a concrete commitment. "I hope they make that deal, but that's what they told me," Trump said Thursday during a briefing. He added that they did not discuss potential "concessions" from the U.S. in exchange for any production cuts. Still, Ben reports, the Trump administration is pressing OPEC to hold an emergency meeting as early as next week to try to end the standoff in the oil market.

What are his options? Ahead of today's meeting, the Energy and Interior departments prepared to send Trump a menu of options the administration could take to provide relief to the domestic oil industry, according to industry officials briefed on the issue. The list of options for Trump are expected to contain measures that Republican lawmakers recommended, including suspending royalty payments for oil produced on federal lands and the extension of federal lease terms. It may also include suspending the Jones Act, which prevents ships that are foreign-owned, -flagged or -crewed from transporting products between U.S. ports.

More than 40 Republican lawmakers, including Minority Whip Steve Scalise, also sent a letter to Trump ahead of the meeting laying out five potential policy options to help U.S. oil and natural gas producers.

MNUCHIN RESPONDS: Treasury Secretary Steven Mnuchin responded to Senate Energy Chairman Lisa Murkowski's letter that asked him to ensure federal loans are available to U.S. oil and gas companies during implementation of coronavirus relief legislation, H.R. 748 (116). "I have very limited ability to do direct loans out of the Treasury," Mnuchin said during Thursday's coronavirus briefing, adding that he can do so for passenger airlines, cargo airlines, contractors and national security companies. "Our expectation is the energy companies like all of our other companies will be able to participate it broad-based facilities, whether it is the corporate facility or the main street facility. But not direct lending out of the Treasury." READ MORE