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The United States is set to release 11 million barrels of oil from its Strategic Petroleum Reserves (SPR) ahead of Iranian sanctions that are set to go into effect just a couple of months from now, according to Reuters. This reserves sale is part of a previously announced drawdown for fiscal year 2019.
The SPR, which technically serves as emergency oil stockpiles, has only been tapped for this reason three times since its inception, according to the Energy.gov website. More often, the reserves have been tapped for test sales, to cushion the blow of minor supply disruptions, and to generate revenue.
While part of an early plan, the 11 million barrels are thought to take the sting out of what many feel will be supply disruptions caused by US sanctions on Iran, which are set to take effect in November. It will also take the sting out of high gas prices at the pump—a nuisance for Republicans in the runup to mid-year elections.
The sale is one of several this year alone, including FY 2018 mandated and FY 2018 modernization sales, in which billions of the SPR were sold.
Some think the sale may help to curb gasoline prices, which are stubbornly high heading into mid-year election season. Others think that the SPR won’t do anything to lower prices at the pump. While the jury is out as to the effect an SPR release will have on prices, most agree that global oil inventories will take a hit when sanctions inevitably bite Iran, swinging the industry into a deficit.
The 11 million barrels of sour crude will be sold between October 1 and November 30, which coincides with the next fiscal year.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.