Oil down as White House proposes selling U.S. oil reserves
Oil prices fell on Tuesday, weighed down by U.S. 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 look set to extend output cuts in a bid to tighten the market.
Brent crude (LCOc1) ended a run of four days of consecutive gains to trade 21 cents lower at $53.66 per barrel at 1142 GMT.
U.S. light crude (CLc1) was down 19 cents at $50.94.
The White House plan to sell off half of the nation’s 688 million-barrel oil stockpile from 2018 to 2027 aims to raise $16.5 billion and help balance the budget.
The budget, 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 (DE:CBKG). “But of course, it could weigh on the back end of the forward curve.”
A release of U.S. strategic reserves could jolt an already imbalanced oil market and undermine attempts by the Organization of the Petroleum Exporting Countries and other producers, including Russia, to end a persistent supply glut.
OPEC, led by Saudi Arabia, and other participating producers meet on May 25 and are expected to extend a pledge to cut output by 1.8 million barrels per day (bpd), possibly until March 2018. The cuts were initially agreed to last six months until the end of June.
Kuwaiti Oil Minister Essam al-Marzouq said on Tuesday not all OPEC countries and its allies supported a nine-month extension and producers would discuss this week whether to extend output cuts by a six or nine months.
Other delegates told Reuters they predicted a smooth meeting with a nine-month extension likely to be agreed.
Oystein Berentsen, managing director for oil trading company Strong Petroleum in Singapore, said the White House proposal was a surprise, but that over a 10-year period the sales would only average around 95,000 bpd.
“It’s not huge, but it won’t help Saudi efforts,” he said.
Releasing reserves would add supplies to already high and rising U.S. production .
Goldman Sachs (NYSE:GS) 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.”