Early SPR Release May Reflect Trump's Concern Over Oil Prices

(Bloomberg) -- The U.S. sale of 11 million barrels of oil from its emergency stockpile will likely do little to offset the impact of sanctions on Iran.

That timing of the sale -- with the barrels set to hit the market in October and November -- may reflect the White House’s concern over tight supplies amid the renewal of U.S. sanctions, according to analysts at ClearView Energy Partners LLC. The Trump administration has asked allies to halt all imports of Iranian oil by Nov. 4, stoking global supply fears. Yet an 11-million-barrel sale over two months likely won’t do much to offset the impact of sanctions, which the administration estimates will remove 700,000 to 1 million barrels a day of Iranian crude from the global market by early November.

Analysts have also speculated about whether President Donald Trump will announce an emergency release from the Strategic Petroleum Reserve to lower U.S. pump prices in the run-up to November’s mid-term elections.

The release will “at least optically” help Trump appear to achieve his goal of lowering gasoline costs, according to Michael Tran, commodity strategist at RBC Capital Markets LLC. “The truth is that retail gasoline prices always trend lower during the fall shoulder season, which also coincides with when domestic refiners head into seasonal maintenance,” he wrote in a note.

Early SPR Release May Reflect Trump's Concern Over Oil Prices

The October sale of sour, high-sulfur crude, which was announced on Monday, is part of a regular draw-down schedule to raise money for government programs. The Energy Department will draw crude from three sites that are part of the Strategic Petroleum Reserve: Bryan Mound and Big Hill in Texas, and West Hackberry in Louisiana.

Any further action by the president, who can release as much as 30 million barrels in an emergency, is unlikely before the Nov. 4 deadline, ClearView said.

Trump has proposed the sale of half of the stockpile -- which currently totals 660 million barrels -- to cut the budget deficit. Congress has so far authorized the sale of around 240 million barrels between 2017 and 2027.

Bids must be submitted no later than 2 p.m. Central Time on Aug. 28, with contracts awarded within 7 business days. Deliveries will take place in October and November, according to the notice.

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