West Texas crude has lost nearly $5 a bl. in price since late last week. Physical stocks are
up and winter is winding down. But the DOE also announced it is planning a "test sale" of
5 million barrels of crude, the first such since 1990. The sale involves a small fraction of
the reserve but it is timely for several reasons. Oil was about $10 a bl. high on a seasonal
basis with industry responding tardily. As well, knocking $5 off the oil price sends Putin a
message about new US flexibility with oil as domestic production continues to surge. A
weaker market can punish Russia's revenue take and budget. Finally, Political unrest in
Venezuela is growing and turning more violent as the economy implodes with rocketing
inflation and acute shortages of everything but anger. The sale from the reserve may test
more than just checking up on mechanics and logistics for oil release.
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