U.S. strategic oil sale will have few market consequences

The pending sale of crude oil from strategic reserves in the United States should have no major impact on global markets, energy economists said.

On Monday, the U.S. Energy Department said it would sell 8 million barrels of light, sweet crude oil from the Strategic Petroleum Reserve in January, but for actual delivery between March 1 and April 30.

The release falls under a measure passed in December that allows for the sale of up to $375.4 million in crude oil for the SPR to finance its upkeep and modernization.

As of Tuesday, there were 695.1 million barrels of oil stored in strategic reserves in the United States.

The sale, meanwhile, would come at a time when analysts and investors are watching for data indicating the degree to which the market is balanced between supply and demand. Members of the Organization of Petroleum Exporting Countries in late November agreed to trim production to counter a glut of oil brought on in part by the rise in U.S. shale oil production a few years ago.

Analysis emailed from the economists at S&P Global Platts said the volume of crude oil injected into the market from the SPR would be relatively negligible and the impact on the price for oil should not be influenced. Platts estimates demand for crude oil last year in the United States was around 16 million barrels per day, meaning the volume released from the SPR is about 12 hours worth of U.S. demand.

The release, however, would have a psychological impact given the sensitivity that supply and demand has on daily and front-month price points for crude oil. "All eyes" are on which producers are cutting what volumes and the SPR release could play into any narrative on what determines true market balance, Platts found.

Crude oil prices started January at an 18-month high, but have since declined as U.S. shale oil producers respond to improved market conditions and weigh on balance sentiments. Platts said it expected a price for Brent crude oil, the global benchmark, at $52 per barrel for the first half of the year. Brent was priced at around $55.30 per barrel early Tuesday.

"We saw little price response the last time barrels were released from the SPR, which was the test-release of 5 million barrels that took place during April-May of 2014," Platts reported. "During that time the oil complex experienced some minor pressure, but prices quickly rebounded."