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United States Sells 11M Oil Barrels to ExxonMobil, Others

Zacks Equity Research
The crude sale by the Department of Energy comes ahead of Trump's new set of Iran sanctions.
The crude sale by the Department of Energy comes ahead of Trump's new set of Iran sanctions.

The United States intends to release 11 million barrels of oil from its Strategic Petroleum Reserve of 660 million barrels, following a regular draw-down schedule devised to generate funds for government programs. The sour crude is expected to reach the market in October and November, after being sold as a fund generator for a drug program. The oil will be supplied from sites in West Hackberry, LA and Bryan Mound and Big Hill, TX.

With the target of reducing budget deficit, President Trump proposed the sale of half of the Strategic Petroleum Reserve. So far, the Congress has authorized the sale of about 240 million barrels of oil during 2017-2027.

Who Bought the Crude?

Several energy companies bought the oil from the U.S. Department of Energy’s (DOE) Office of Fossil Energy following the notice provided at August-end.

The largest publicly traded energy company, Exxon Mobil Corporation XOM bought around 3.3 million barrels of oil from the stockpile. Motiva Enterprises LLC of Saudi Arabia bought 2.4 million barrels, while downstream energy company Phillips 66 PSX bought more than 2 million barrels. Royal Dutch Shell plc RDS.A bought crude of almost 1.6 million barrels from the stockpile and Marathon Petroleum Corporation MPC purchased nearly 1.4 millions. Currently Marathon Petroleum has a Zacks Rank #2 (Buy). Also, Valero Energy Corporation VLO agreed to purchase 330 thousand barrels of crude. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The selling price of the crude was in the range of $67.66-$69.05 per barrel.

Global Scenario

Notably, a new set of sanctions from the United States directed toward the Iranian energy industry are expected in early-November. The sanctions would potentially lower demand for Iranian crude in the global market, removing 700 thousand to 1 million barrels of oil per day supply. Iran is the third highest producer of the Organization of the Petroleum Exporting Countries (OPEC).

Although the recent sale of crude from the stockpile is not enough to reduce the negative effect on oil supply in the international oil market, it can definitely ease the tightness of the same to some extent. Per analysts at ClearView Energy Partners, the timing of the crude sale indicates the concern of President Donald Trump related to the oil market. More such decisions from the Trump administration will help to maintain the smooth supply of oil. The President can release up to 30 million barrels of oil during emergency periods.

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