The U.S. Department of Energy plans to sell up to 6 million barrels of crude oil from the Strategic Petroleum Reserve (SPR), with deliveries taking place in April and May, the Department of Energy said on Thursday.
DOE plans to draw down and sell crude oil from three SPR sites-Bryan Mound and Big Hill in Texas, and West Hackberry in Louisiana. The Department of Energy announced today a notice for a price-competitive sale of up to 3 million barrels from Bryan Mound, up to 1.5 million barrels from Big Hill, and up to 1.5 million barrels from West Hackberry.
DOE will award contracts to successful offers no later than March 15, 2019.
The sale is part of the law that authorizes the Secretary of Energy to draw down and sell up to US$2 billion of SPR crude oil for fiscal years 2017 through 2020, to carry out an SPR modernization program. In fiscal year 2019, the Secretary is authorized to sell up to US$300 million worth of crude oil from the SPR to carry out the SPR Life Extension Phase II project as part of the modernization program.
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Although the sale does not appear to be aimed at easing possible supply concerns, deliveries will be taking place around the time in which the U.S. waivers for Iran's oil customers to continue importing Iranian oil will expire in early May. Venezuela's oil exports are also likely to have further dropped by that time due to the U.S. sanctions on its oil industry.
At the end of January, reports emerged that the U.S. Administration was considering tapping the SPR as it imposed the sanctions on Venezuela. However, as Reuters noted, the reserve mostly lacks heavy crude similar to the grades that Venezuela typically exports.
Sales from the SPR would likely have little effect on the global oil market and the U.S. didn't tap the reserve before the sanctions on Iran returned.
"If you look at the Strategic Petroleum Reserve and you were to introduce it into the market, it has a fairly minor and short-term impact," Secretary of Energy Rick Perry said in September, a month and a half before the U.S. sanctions on Iran kicked in.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More