WASHINGTON Oil buyers have expressed strong interest in the oil that the United States plans to sell from its emergency reserves, the U.S. Energy Department said on Thursday, calling the oil sale "substantially oversubscribed."
The Obama administration was slammed by the oil industry lobby for its decision last week to tap the reserves. The lobbyists said there was already plenty of oil supply in the United States.
But almost a dozen oil companies and trading firms sought more information about the opportunity on a conference call earlier this week, and the Energy Department said it received more than 90 offers for the 30.2 million barrels of crude oil it plans to release from the Strategic Petroleum Reserve, which stores the crude in underground salt caverns.
The department is pleased with the prices offered by companies, which reflect the strong interest in the oil, a DOE official said.
The government will provide an initial list of buyers on July 5, the official said, and final contracts with the prices paid for the oil will be announced by July 11.
The move to tap the U.S. reserve is part of a global effort by industrialized countries to drive down world oil prices by releasing a total of 60 million barrels, with half that amount coming from nations in Europe and Asia.
Analysts have said the release has been disorganized and has the potential to backfire.
PRICES GO UP, PRICES GO DOWN-CHU
The release was a short-term measure to address the supply disruption caused by political strife in Libya, Energy Secretary Steven Chu said, noting that the United States needs to invest in long-term fixes like cars that use less fossil fuel.
"The price of oil goes up, the price of oil goes down, 20 years in the future it's more likely to go up than down. Let's do something about it. We've got to do something about it," Chu said during a news conference on the sidelines of the Clinton Global Initiative meeting in Chicago.
The 28 countries in the International Energy Agency, which coordinated the release, have said they plan to assess the supply situation in a month's time.
Chu did not indicate what the criteria would be for deciding whether to dip into the reserve again.
"Fundamentally, the coordinated effort was done because there was a disruption of supply. This disruption in supply, we're not even sure when it's going to be over," Chu said.
The strong interest in the U.S. sale could bode well if the government decides it needs to release more oil from the reserves, said Phil Flynn, an energy analyst with PFGBest Research in Chicago.
"If you can get enough people who want to get new oil, resell the oil, that's going to put more oil into the market quickly," Flynn said.
"If we're importing less sweet crude or keeping more at home, that should free up supply on the other side of the globe," he said, noting that European buyers have been most affected by the Libyan supply disruption.
(Additional reporting by Andrew Stern in Chicago and Roberta Rampton in Washington; Editing by Dale Hudson, Lisa Shumaker, Gary Hill)