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​US to sell strategic oil reserves for first time in 24 years

Published time: March 13, 2014 15:26
An offshore platform docked in Port Fourchon, Louisiana (AFP Photo / Mira Oberman)

An offshore platform docked in Port Fourchon, Louisiana (AFP Photo / Mira Oberman)

The Obama administration plans to sell 5 million barrels, or less than 1 percent of the Strategic Petroleum Reserve, calling the move a test of the petrol distribution system. The last time this happened was in August 1990 before the first Gulf War.

Due to the recent dramatic increase in domestic crude oil production, significant changes in the system have occurred -- including pipeline expansion, construction of new infrastructure, reversed flow of existing pipelines and increased use of domestic crude oil terminals,” William Gibbons, the US Energy Department spokesman said in a statement.

The government rejected a connection with the turmoil in Ukraine or other geopolitical events.

On Thursday the price of West Texas Intermediate (WTI) crude futures for April delivery fell by 2.3 percent on the New York Mercantile Exchange. It’s the biggest drop in two months.

WTI crude has a high sulfur content, similar to oil exported from Russia. The large sale might be a test of the US system’s readiness for a hiccup in Russian supply, analysts suggest.

The timing of this makes it seem like a warning shot across the bow towards the Russians,” the Financial Times quotes Michael Wittner, the head of global oil research at Société Générale in New York.

The US Secretary of State John Kerry has warned about tough sanctions if Moscow does not draw back from its position over Crimea, in particular support of the region’s status referendum on March 16.

However former US State Department employee David Goldvin thinks the opposite. He considers that test sale is more directed at fighting volatility of supply from larger oil producers like Venezuela and Nigeria, and the long running question over Iran, and its nuclear ambitions.

Comments (21)

 

Markus Armstrong 14.05.2014 18:47

Max 14.03.2014 05:17

I think the maths behind ...

In terms of it being a true strategic reserve -- where a nation could use it for say 3 years exclusively with no other inputs -- it is not that.

  


ba sically, the reserves will last 90 days in an environment where there are no imports and domestic production is completely shut down. If you factor in domestic production, it could last quite a long time. At max production & capacity, we can refine, and have available to use, almost 100% of our requirements.

 

Markus Armstrong 14.05.2014 18:41

Holly Parks 17.04.2014 22:33

Media noise, the U.S. imported 63% of the oil it used in 2013, it is just taking what it imported and using some of that.

  


Buy low, sell high. And it will be replaced by domestically produced oil. Pretty straight forward.

 

Holly Parks 17.04.2014 22:33

Media noise, the U.S. imported 63% of the oil it used in 2013, it is just taking what it imported and using some of that.

View all comments (21)
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