US holds largest sale of strategic oil reserves in 7 years

The U.S. is holding its largest sale of oil from strategic reserves since 2014 at a time when the outlook for fuel demand is darkening amid the resurgent Covid-19 virus.

The Energy Department plans to auction off 20 million barrels of crude, twice as much as it offered for sale 3 1/2 months ago. The oil will be delivered during the fourth quarter, when U.S. demand for gasoline and other fuels typically falters and refineries slow down oil purchases while they shut down equipment for repairs and maintenance.

The sale comes after crude prices have dropped 15% since touching a 6 1/2-year high in early July as the spread of the delta variant threatens to derail the economic recovery and return to business as usual. Companies including BlackRock Inc. and Jefferies Financial Group Inc. are postponing plans to return workers to offices.

But the U.S. won’t have problems to sell the barrels because production hasn’t entirely caught up with demand, according to John Coleman, an analyst for North American crude markets at Wood Mackenzie Ltd. The market will still be in a deficit in the fourth quarter, and the 20 million barrels released from the nation’s emergency reserves should be absorbed.

The reserve, created in 1975 to serve as an emergency stockpile, held 621 million barrels in four underground caverns as of Aug. 13, Energy Department figures showed.

Benchmark American crude futures rose almost 5.3% on Monday in New York amid a broader rally in commodities and equity markets.