Oil price crash is tempting the United States to increase the size of its Strategic Petroleum Reserve
Oil prices have tumbled in recent days and reached unprecedented levels. This encourages an increase in the volume of oil inventories by purchasing the cheap oil from the market so long as there are places suitable for storing it.
In this context, the US President, Donald Trump announced that the United States is considering increasing the Strategic Petroleum Reserve (SPR) of the United States with an amount of up to 75 million barrels of crude oil, and of course this depends on finding suitable and sufficient places to store the oil.
It is worth noting that the strategic oil reserves are oil stocks that can meet the needs of the United States for oil and its derivatives for a period of 3 months in the event that supplies are interrupted for some reason. There is legislation passed by the US Congress in 1975 that obliges the federal government to create sites to store enough crude to secure demand for it in the face of acute risks. In addition to federal stocks, energy companies have to store their own quantities that are equal to the total of the federal stocks.
The process of increasing the SPR of the United States these days has been tempted by the collapse in oil prices worldwide. The US oil futures contract during the transactions of Monday, April 20, turned negative for the first time in history. As for futures contracts for June 2020 delivery, they also fell to $25.43 a barrel for Brent crude and to $20.43 a barrel for US crude.
With the slackening of the actual global demand for oil due to the interruption in activity caused by the Corona crisis, the oil markets became saturated with excess supply. It seems that this situation may continue for other months to come because economic activities are disrupted and consumers around the world are staying in their homes in order to limit the spread of the new Corona virus.