The U.S. government will award nine oil producing firms in the country a total of 23 million barrels of oil storage capacity, Energy Minister Dan Brouillette announced via Twitter on Tuesday.
Under orders of President Donald Trump, the U.S. Department of Energy will start negotiating the awarding of contracts to nine U.S. oil producers to store their crude oil in the Strategic Petroleum Reserves (SPR), Brouillette said.
"Most of these deliveries will be received in May and June 2020, with possible early deliveries in April," he wrote.
"Making storage available in our SPR is an important step towards providing relief to the American energy industry and its incredible workforce," he added.
SPR are oil stocks held for emergencies by the U.S. government, which can be opened to withdraw oversupply from the domestic market, or used to sell oil to the market when there is scarcity in supply.
Total SPR capacity in the U.S. stood at 713 million barrels as of September 2019, according to the U.S.' Energy Information Administration (EIA) data.
There was 635 million barrels of crude oil in SPR as of the week ending April 3 2020, the EIA data showed, which means approximately 89% of SPR capacity in the country is full.
Private companies, on the other hand, hold commercial crude oil inventories. Their availability depends on individual companies' capacity levels. Commercial crude stocks in the U.S. stood at 484.4 million barrels for the week ending April 3 2020, according to the EIA data.
Due to coronavirus-related low global oil consumption and the rising glut of supply, it is becoming difficult for governments and private oil producers to store crude oil they have been producing from wells on a daily basis.
Crude oil storage can reach full capacity next month if OPEC+ oil producing countries are not joined by other nations in production cuts.
By Ovunc Kutlu