The oil market

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

RT,

13 March, 2014

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.