WASHINGTON The government expects it will have no problems finding buyers for all 30 million barrels of oil it auctioned as part of a global effort to address high oil prices, an Obama administration official said on Thursday.
Oil buyers have expressed strong interest in the crude that the United States is selling from its emergency reserves, the U.S. Energy Department said, calling the oil sale "substantially oversubscribed."
The sale represents half of the 60 million barrels that industrialized nations are releasing jointly to fill a gap in supply caused by political strife in Libya.
Analysts have said the global release has been disorganized and has the potential to backfire.
The Obama administration was slammed for its decision last week to tap the Strategic Petroleum Reserve (SPR) by the oil industry lobby and other critics, who said there was already plenty of oil supplies in the United States and cast the move as a political tactic.
"The oversubscription of the (U.S.) SPR auction indicates both that supply disruption is a factor and that we will be able to place all 30 million barrels into the market," an administration official said.
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 its 30.2 million barrels of SPR crude.
PREPARED TO DO MORE
The administration also expects help from Saudi Arabia, the world's largest oil producer, which has committed to produce more oil to address the supply shortage, the official said.
"We will continue to monitor the adequacy of oil supply and are prepared to act further if necessary," the official said.
But the U.S. also needs to invest in long-term fixes to high energy prices, like cars that use less fossil fuel, Energy Secretary Steven Chu said on Thursday.
"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.
Chu did not indicate what the criteria would be for deciding whether to dip into the reserve again.
The Energy 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.
PAVES WAY FOR ANOTHER RELEASE?
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 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 and Bernard Orr)