RE: US strategy20 Aug 2018 21:56
The US government has approved the latest sale of crude oil from its Strategic Petroleum Reserve, a move allowed under recent statutes that will inject additional supplies into the world market as Washington tightens screws on Iran.
Eleven million barrels of sour crude will be offered for delivery between October 1 and November 30, the energy department said in a notice of sale posted Monday. The sale, if not its timing, was required under 2015 budget legislation and a healthcare law passed in 2016, according to the notice.
The Strategic Petroleum Reserve was established in the 1970s after the US economy was paralysed by an oil embargo. As recently as 2011 it contained 727m barrels in caverns along the Texas and Louisiana coasts. It was used to address fuel shortfalls caused by emergencies such as Hurricane Katrina in 2005 and the collapse in Libya’s production in 2011.
Emboldened by rising domestic oil production, lawmakers have in recent years mandated sales to fund the federal government. Since 2015, Congress has passed five laws that call for sales from the SPR that would cut its size to 410m barrels by 2027, according to an analysis by Columbia University’s Center on Global Energy Policy.
Since the sales mandated by Congress began in early 2017, SPR inventories have already declined to 660m barrels, according to the Energy Information Administration.
The sale this autumn will come as renewed US sanctions on Iran are expected to reduce its oil exports by about 1m barrels per day.
ClearView Energy Partners, a consultancy, noted that October 1 was the first date that new sales will be allowed under the authorising statutes.
“Choosing the earliest possible opportunity afforded by statute would appear to reflect President Donald Trump’s concern regarding oil market tightness associated with the reinstatement of Iran oil sanctions,” the consultancy said.
The sale also does not preclude the White House from invoking emergency authorities to sell as much as 30m barrels more in conjunction with its sanctions on Iran, ClearView said.
Oil futures weakened after the sale notice, with Nymex October crude trading up 15 cents at $65.36 on Monday afternoon
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