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U.S. Releases Oil From Strategic Petroleum Reserve Energy Department Releases 5 Million Barrels in “Test Sale”

U.S. Releases Oil From Strategic Petroleum Reserve Energy Department Releases 5 Million Barrels in “Test Sale”

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April 16th, 2014

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AMY HARDER
Updated March 12, 2014 2:26 p.m. ET
The U.S. Energy Department on Wednesday announced that it is releasing 5 million barrels of oil from the strategic petroleum reserve, a federally owned stockpile of oil with a capacity of 727 million barrels that is available in case of an emergency or sudden disruption in oil supply.

A spokesman for the Energy Department described the release as a “test sale” to evaluate how the reserve system works to release and sell the oil. Such a test sale is required by law and is done on a periodic basis.

“Due to the recent dramatic increase in domestic crude oil production, significant changes in the system have occurred—including pipeline expansion, construction of new infrastructure, reversed flow of existing pipelines and increased use of domestic crude oil terminals,” said DOE spokesman Bill Gibbons. “In order to appropriately assess the system’s capabilities in the event of a disruption, today the Department of Energy authorized a test drawdown and sale of up to 5 million barrels of sour crude oil.”

White House press secretary Jay Carney said Wednesday that the drawdown was done specifically for operational purposes, and wasn’t related to Ukraine.

The release was designed to have minimal market impact, according to the Energy Department. The Energy Department said the release has been under discussion within the administration for months. It said the oil is being released Wednesday so refineries interested in buying crude oil from the reserve could do so as they prepare for the summer driving season and switch over to summer grade gasoline, which is more expensive than the kind used in winter.

The last time the administration released oil from the reserve was in 2011 in coordination with the International Energy Agency, during unrest in Libya that was disrupting the market. At that time, 30 million barrels were released according to DOE.

The last time the Department conducted a test sale was in August 1990 for 4 million barrels, according to DOE. The DOE spokesman didn’t specify how often these test sales are conducted or what the law requires.

Oil prices extended losses Wednesday on a larger-than-expected rise in crude-oil supplies and the announcement of the government plans to sell oil from the strategic petroleum reserve.

Light, sweet crude for April delivery fell $2.05, or 1.5%, to $97.98 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe slipped 33 cents, or 0.3%, to $108.22 a barrel.

—–Alicia Mundy and Nicole Friedman contributed to this article

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