The U.S. Department of Energy said it plans to sell some of the oil from the Strategic Petroleum Reserve, the world's largest emergency supply of oil.
The department's Office of Fossil Energy said the sale from the federally-owned stockpile was scheduled for late August. The office aims to draw down and sell 14 million barrels of oil in order to meet the requirements of bipartisan legislation, most recently enshrined in the 21 Century Cures Act.
Under the measure, signed in January, the government aims to sell off 25 million barrels of oil over the next three years, with 9 million on tap for sales next year.
"Revenues from the sale will go to the general fund of the United States Department of the Treasury, to carry out the National Institutes of Health's innovation projects," the department reported.
This would be the second release from the SPR this year and 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. That agreement went into force in January and expires in March.
A report from S&P Global Platts that followed the first SPR release, indicated the volume of crude oil injected into the market from the SPR would be relatively negligible and the long-term impact on the price for oil should be relatively minor. To put it in perspective, total U.S. crude oil production per day is around 9 million barrels.
Phil Flynn, senior market analyst for the PRICE Futures Group in Chicago, told UPI that "based on what we have seen lately, it will only replace two weeks' worth of draws" from U.S. crude oil stockpiles.
OPEC's balancing effort aims to bring inventories down near the five-year average. According to OPEC, commercial oil stocks for the developed countries in the Organization for Economic Cooperation and Development in June were still above the latest-five year average by about 252 million barrels.
The amount of crude oil in the SPR was 678.9 million barrels as of Aug. 4, a decline of 16.2 million barrels from one year ago.
The SPR was designed as an emergency reserve and any release of oil from there usually coincided with international crises like the outbreak of the civil war in Libya in 2011. The International Energy Agency requires member states to hold the equivalent of 90 days of the previous year's imports in reserve.