Strategic oil reserve being sold by Trump will not undermine the market

31 may 2017 | IA REGNUM

Selling-off half the U.S. strategic oil reserve is unlikely to significantly affect the world market. A short-term decrease in the price of this energy source can occur only if sales are uneven. This opinion was expressed by an expert of the Analytical Center Alexander Martynyuk in his interview to REGNUM News Agency, while he was commenting on the decision of President Donald Trump to sell off almost 350 million barrels of the country's Strategic Petroleum Reserve.

Aleksander Martynyuk
Aleksander Martynyuk
Department for Strategic Studies in Energy

In general, according to Mr. Martinyuk, the draft budget contains many items that cause controversy in the expert community. Which includes the issue of selling half of the strategic reserve, since this proposal is to a large extent related to the issue of America's energy security, the reasonableness of the budget assumptions, the need to amend legislation and other things. In this regard, the bill may well face problems with approval by Congress.

"However, if the initiative gets support, the average daily sales from the strategic reserve will not be significant in comparison to global oil supply and demand (96-97 million barrels per day). While annual short-term price fluctuations may take place in case of uneven sales," the analyst said.

Meanwhile, OPEC and 11 other exporting nations recently agreed to extend cuts in oil output by nine months to March 2018. The volume of cuts remains at the same level and amounts to a total of 1.8 million barrels per day. As the expert notes, additional sales of oil from the strategic reserve may begin near the end of the planned period of the current stage of the OPEC Plus deal.

"The parties to the transaction will certainly take this factor into account in making decisions regarding further actions. But given the volume of planned sales from the Strategic Petroleum Reserve, this is unlikely to be a decisive factor in adjusting their strategy," Mr. Martinyuk concluded.