DOE Awards 30.64 Million Barrels Of Crude In Oil Sale - NASDAQ ~ Awards Knowledge Article

(Updates fifth paragraph to show potential volume of July deliveries)

--Energy Department awards contracts to 15 companies to buy 30.64 million barrels of oil

--Value of oil sold from emergency stockpiles is $3.3 billion

--Valero Energy was the biggest buyer, with 6.9 million barrels

By David Bird and Tennille Tracy

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Fifteen companies, ranging from major refiners to trading companies and banks, were awarded contracts to buy all 30.64 million barrels of sweet crude oil offered in the U.S. government's emergency sale, the Energy Department said Monday.

Valero Energy Corp. (VLO), with 6.9 million barrels, or 22.5% of the volume on offer, was the biggest buyer.

The average price of bids for the oil was $107.19 a barrel. Winning bids ranged from $104.98 to $109.76 a barrel. Final prices will be set based on the value of Light Louisiana Sweet crude oil over a five-day period around the time that oil is delivered.

Based on bids accepted Monday, the value of the oil sold from the emergency stockpile is $3.284 billion, Energy Department data show.

The Energy Department said that it is working with other agencies to streamline deliveries and that some companies had requested early delivery of the oil, in July, rather than in August, as had been planned. About 7 million barrels of crude could be delivered in July, with the remainder in August, a source said, adding that companies are still finalizing arrangements.

Energy Department rules forbid the crude oil to be exported, except with specific approval and the importation of a similar volume of petroleum products.

The U.S. sale was disclosed June 23, in conjunction with an International Energy Agency plan to release about 60 million barrels of oil from global stockpiles held in consumer countries to cover, in part, the loss of Libyan crude oil due to the ongoing civil war in Libya. IEA said Monday that Germany's release would be 34% less than previously planned, cutting the total volume placed in the market to 59.83 million barrels.

The oil-sale move came as a surprise to the market, as it followed a commitment by Saudi Arabia, the world's largest oil exporter, and its Gulf neighbors, to boost oil supplies. The oil market has been abuzz with concerns that the move by the IEA may cause producer countries to limit the size of their expected output increases, which many analysts said will be needed when demand increases later this year.

The Energy Department has conducted this type of sale before, but buyers haven't always purchased the full amount of oil that was available. The willingness of refiners, trading companies and banks to buy all of the oil this time around signals a concern about future supplies, one expert said.

"I think the number of bidders was one of the things...that shows there are concerns in the marketplace over just how much oil is going to be out there," said David Pumphrey, deputy director of energy and national security for the Center for Strategic and International Studies.

The Energy Department's previous sales differed from its most recent offering in that they involved both sweet and sour crude oil, as opposed to just sweet crude oil.

The administration will have to determine whether the release of 30 million barrels was enough to placate supply concerns and control prices or whether it will have to sell additional stocks, Pumphrey said.

Both the Energy Department and IEA had said they will study the impact of the sale and decide whether to take further action.

Cash-market prices of Light Louisiana Sweet crude oil, reported by Dow Jones Newswires, showed that, in the 11 trading days between sale's disclosure sale and Friday, LLS averaged $109.08 a barrel, or $5.84 less than in the 11 days before the sale was revealed. The high-low range of prices before and after the sale's announcement was more than $15 a barrel, as LLS hit $118.73 on June 9 and dropped to $103.61 a barrel on June 27.

Data from the Energy Department, which previously described the offering as " substantially oversubscribed," show bids for some 26.495 million barrels of crude oil were rejected as being too low. That volume included another 4.875 million barrels from Valero.

The average price of rejected bids was $100.30 a barrel, with rejected bids ranging from $91.958 to $104.88 a barrel.

Other major winning bidders included Vitol Holding BV's U.S. unit, Vitol Inc., which will receive four million barrels.

Energy Secretary Steven Chu had said in May 2009 that any possible department dealings with Vitol will have to undergo a "hard review," after lawmakers expressed concern about the company's trade in providing petroleum products to Iran. Chu's comment came after Vitol was awarded an Energy Department contract to supply one million barrels of crude oil to the Strategic Petroleum Reserve.

A spokesman for Vitol, one of the world's largest oil-trading firms, said prior to the submission of bids it is in full compliance with U.S. laws that bar trading with Iran. The comments come after the government amended its rules for the sale from the nation's SPR to require bidders to certify they aren't trading with Iran.

Shell Trading (US) Co., a division of Royal Dutch Shell PLC (RDSA, RDSA.LN), was awarded 3.65 million barrels, and Trafigura AG, which calls itself the third-largest independent oil trader in the world, won 1.1 million barrels. Barclays PLC (BCS, BARC.LN) won 200,000 barrels of oil, while J.P. Morgan Chase & Co.'s (JPM) J.P. Morgan Ventures Energy Corp. received 1.5 million barrels.

Trading giant Glencore Ltd. was among losing bidders, along with Morgan Stanley (MS), PetroChina Co.'s (PTR, 0857.HK) PetroChina International (America) Inc., and several refiners.

-By David Bird, Dow Jones Newswires; 1-212-416-2141; david.bird@dowjones.com

--Tennille Tracy contributed to this report.

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