Congress Authorizes DOE to sell.
With the green light from congress, the U.S. Department of Energy (DOE) could begin to sell off some of its strategic petroleum reserve (SPR) as soon as January. The main motivation to sell crude stems from a DOE report issued to Congress last September, which warned them about the condition of the reserve. “This equipment today is near, at, or beyond the end of its design life,” the report said. The sale "will allow the Department to take necessary steps to increase the integrity and extend the life”
The multi-year process to shrink the nation’s stockpile of oil will begin with this first approval from congress for the sale of $375.4 million worth of oil in its recent budget resolution. The boom in domestic drilling has eased their concerns about supply, allowing them to proceed with this sell off and maintenance.
Russia is on board with cuts.
Russia publicly announced it will cut crude oil output and cooperate with OPEC to support global oil prices. Even though it was generally thought they would cooperate, President Vladimir Putin confirmed this at his end-of-year news conference last Friday. Putin said he hoped this would help oil prices stabilize at current levels, above the average oil price of $40 per barrel factored into Russia’s budget. Putin said the country’s oil-dependent budget would receive an extra 1.75 trillion rubles (~290 billion dollars) next year if oil prices averaged $50 per barrel.
Oil continues its run.
With its longest streak since August of this year, oil continues to climb upward in anticipation of OPEC and other producing nations beginning their output reductions to stabilize the market. West Texas Intermediate for February delivery rose as much as 32 cents to $53.34 a barrel on the New York Mercantile Exchange and traded at $53.21 in Hong Kong (in the AM). There was no trading Monday because of the Christmas holiday. Total volume traded was about 85 percent below the 100-day average. Prices are up 44% this year.