The US Department of Energy has announced it will offer an additional 10 million barrels per day from the US Strategic Oil Reserve for sale ahead of plans by the European Union to ban most Russian oil sales in December.
The agency announced plans to offer 10 million barrels of low-sulfur crude from storage caverns in Texas and Louisiana in November in the runup to the implementation of the ban. Bids will be due by September 27th for supplies originating from Big Hill, Texas, and West Hackberry Louisiana. Awards will be issued by October 7th.
On the news, West Texas Intermediate briefly gave away Monday’s gains.
Global oil benchmarks have mostly given away the gains seen after Russia’s invasion of Ukraine. Supplies have mostly rerouted following the disruptions produced by Western sanctions on Russia, with discounted Russian supplies diverting toward Asian countries which are not adhering to the sanctions regime, and supplies previously consumed by those nation which came from other producers moving to markets in sanction-respecting countries, where prices have risen higher. In addition, global macroeconomic headwinds, including inflationary fears and central bank stances, have fueled fears of a global recession, further applying downward pressures on crude prices.
The timing of the release from the Strategic Reserve coincides with increased indications from OPEC that the cartel is considering a reduction in production. At the last OPEC meeting, the cartel and its allies agreed to a modest 100,000 barrel per day production cut next month.
The Agency had planned to release 180 million barrels over a six month period starting in May. So far the sales from the reserve total 155 million barrels of crude committed for delivery through October 22nd. Of the 10 million being released for November delivery, 1 million are available for possible export.
The biggest buyers from the reserve sales has been US refiners Valero Energy Co. and Marathon Oil Corp.
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