Crude falls on White House proposal to sell US reserves
london — Oil prices fell on Tuesday, weighed down by US President Donald Trump’s plan to sell off half the country’s huge oil stockpile, threatening a future glut even as Opec and its allies cut output to try and tighten the market.
Brent crude ended a run of four days of consecutive gains to trade 36 cents lower at $53.51 per barrel at 0831 GMT.
US light crude was down 33 cents at $50.80.
The White House plan to sell off half of the nation’s 688 millionbarrel oil stockpile from 2018 to 2027 aims to raise $16.5 billion and help balance the budget.
The budget, which was to be delivered to Congress on Tuesday, is only a proposal and may not take effect in its current form.
“Congress needs to agree to this which is rather uncertain,” said Carsten Fritsch, commodity analyst at Commerzbank. “But of course, it could weigh on the back end of the forecast.”
A release of US strategic reserves could jolt an already imbalanced oil market and undermine attempts by The Organisation of the Petroleum Exporting Countries (Opec) and other producers, including Russia, to end a persistent glut.
Opec, led by Saudi Arabia, and other participating producers will meet on May 25 and are expected to extend the period of their pledge to cut output by 1.8 million barrels per day (bpd) from just the first half of this year to all of 2017 and the first quarter of 2018. On Tuesday, Kuwait’s oil minister said not all Opec countries and allies were on board for a nine month extension and producers would discuss this week whether to extend output cuts by six or nine months.
Oystein Berentsen, managing director for oil trading company Strong Petroleum in Singapore said the White House proposal was a surprise, but added that over a 10year period the sales would only average around 95,000 bpd.
“It’s not huge, but it won’t help Saudi efforts,” he said.
The bigger effect, if implemented, could be over the long-term as the value of oil reserves to be sold is scheduled to rise.
Releasing reserves would add supplies to already high and rising US production of 9.3 million bpd, not far off levels of top suppliers Saudi Arabia and Russia.
Goldman Sachs has already warned of “risks for a renewed surplus later next year if Opec and Russia’s production rises to their expanding capacity and shale grows at an unbridled rate.” — Reuters