President Donald Trump’s proposal to sell half of the U.S. Strategic Petroleum Reserves (SPR) will likely have little impact on OPEC’s efforts to reduce a global oil glut, Goldman Sachs said on Tuesday.
The White House budget, delivered to Congress on Tuesday, aims to start selling SPR oil in fiscal 2018, which begins on Oct. 1. Under the proposal, the sales would generate $500 million in the first year and gradually rise over the following years.
Goldman Sachs said such sales would only average around 110,000 barrels per day annually through 2027, 66,000 bpd between 2018-2020 and just 25,000 bpd this year.
“This is negligible relative to both the size of the OPEC cuts of 1.7 million bpd and the global oil market of 98 million bpd,” the bank said in a note.
The Organization of the Petroleum Exporting Countries (OPEC) meets in Vienna on Thursday to consider whether to prolong cuts to reduce a global glut of crude. OPEC and other producing countries including Russia have cut output about 1.8 million bpd in the first half of 2017.
Goldman Sachs said the proposed SPR sales would increase the logistical strains on the U.S. Gulf Coast, which is already struggling with higher shale production.
The U.S. SPR, the world’s largest, holds about 688 million barrels of crude oil in heavily guarded underground caverns in Louisiana and Texas. Congress created it in 1975 after the Arab oil embargo caused fears of long-term motor fuel price spikes that would harm the U.S. economy.