U.S. spot crude prices could weaken following sale of more U.S. reserves - Reuters

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NEW YORK, Oct 19 (Reuters) - U.S. spot crude prices could weaken as the Biden Administration follows through with its plan to sell more barrels from emergency oil reserve by year end, market participants said.

President Joe Biden announced a plan on Wednesday to sell 15 million barrels of crude oil from the U.S. emergency supply and begin refilling the reserve as he tries to dampen high gasoline prices ahead of midterm elections on Nov. 8. He added that extra oil could also be made available for sale if needed.

Certain oil refineries prefer certain grades of crude, so the mix of barrels sold out of the Strategic Petroleum Reserve (SPR) could have a knock-on effect on the U.S. and global refining market. Fuel supplies remain tight globally, and regions such as Europe and the United States are battling for products. read more

In recent sales from the Strategic Petroleum Reserve (SPR), the United States has sold mostly sweet crude barrels, or barrels lower in sulfur content, compared with sour, or heavier barrels, said Rohit Rathod, senior oil market analyst at Vortexa.

Much of the output from the shale fields of Texas are sweet barrels. The SPR barrels have ended up selling at a discount to West Texas Intermediate barrels for delivery at the Magellan East Houston terminal, as demand has increased for sour barrels to make lucrative diesel, Rathod said.

Those barrels, for delivery between November were sold between $86 and $92, lower than the $95.57 per barrel that WTI-Houston sold for on the day of the announcement.

The sour market has also been under pressure, due to increased supplies of Canadian heavy sour and lackluster export demand, said Elizabeth Brown at S&P Global Commodity Insights. Additional barrels of sour grades from the SPR could further weigh on prices.

SPR stockpiles have fallen to 405.1 million barrels, lowest since 1984, Energy Information Administration data showed.

Reporting by Stephanie Kelly and Arathy Somasekhar; Editing by David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

Stephanie Kelly

Thomson Reuters

A New-York-based correspondent covering the U.S. crude market and member of the energy team since 2018 covering the oil and fuel markets as well as federal policy around renewable fuels.

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