Pump jacks are seen at the Lukoil-owned Imilorskoye oil field, as the sun sets, outside the west Siberian city of Kogalym, Russia, in this January 25, 2016 file photo. REUTERS
SINGAPORE: Oil prices fell on Tuesday after U.S. President Donald Trump proposed the sale of half the country's strategic oil reserves in his budget plan, just as producer club OPEC and its allies are cutting output to tighten the market.
After rising in Asian morning trading, Brent crude futures reversed their gains and were at $53.66 per barrel at 0232 GMT, down 21 cents, or 0.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $50.94, down 19 cents, or 0.4 percent.
The White House plan would gradually sell off half of the nation's emergency oil stockpile to raise $16.5 billion from October 2018, documents released by the administration late on Monday showed.
Presidential budgets are often ignored by the U.S. Congress, which controls federal purse strings.
The plan was released just a day after Trump left OPEC's de-facto leader Saudi Arabia for his first overseas state-visit.
Any large release of U.S. strategic reserves would jolt oil markets, where the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, have pledged to cut supplies by 1.8 million barrels per day (bpd) in order to tighten the market and prop up prices.
Traders said that as any sales would only start next year and be gradual, their impact would be bigger on longer-term prices rather than those for immediate delivery.
"That's a surprise. Over a 10 year period though, so slightly less than 3 million barrels per month, it's not huge but it won't help Saudis efforts," said Oystein Berentsen, managing director for oil trading company Strong Petroleum in Singapore.
OPEC, led by Saudi Arabia, and other participating producers will meet on May 25 to discuss extending the period of the cut from covering just the first half of this year to all of 2017 and the first quarter of 2018.
WORLD'S BIGGEST RESERVES
The U.S. strategic petroleum reserves (SPR), the world's biggest, currently stand around 688 million barrels, a week's worth of global oil demand.
Virendra Chauhan, analyst at Energy Aspects, said sour crudes made up 60 percent of U.S. SPRs, while sweet crude grades made up the rest.
U.S. production
The moves comes just after Goldman Sachs warned of "risks for a renewed surplus later next year if OPEC and Russia's production rises to their expanding capacity and shale grows at an unbridled rate."
Demand may also slow. "Quarterly growth of real gross domestic product (GDP) in the OECD area decelerated sharply to 0.4 percent in the first quarter of 2017, compared with 0.7 percent in the previous quarter, according to provisional estimates," the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.
"Our macroeconomic view remains ... price-negative, which is likely to affect the medium-term demand for crude oil," said Marex Spectron. - Reuters
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