- The Washington Times - Thursday, September 23, 2004


Oil prices inched closer to $50 a barrel yesterday even as the Bush administration offered to tap the nation’s emergency stockpile of crude on behalf of refiners whose supply was disrupted by Hurricane Ivan.

It would be the first time the government loaned oil from the Strategic Petroleum Reserve in almost two years.

While analysts said the impact on red-hot energy markets ultimately would depend on the amount of oil made available, they expected the size of any loans — and the effect on prices — to be small.

“If there is any oil loaned from the reserve, it will be minimal and certainly not enough … to make up for oil production that continues to be lost on a daily basis or to kill the momentum of the current rally,” said John Kilduff, senior oil analyst at Fimat USA in New York.

The government did not say which refiners made the requests or how much oil they sought to borrow. An Energy Department spokeswoman said the agency would negotiate with the companies to make “a limited quantity” available.

Light crude for November delivery rose 11 cents to $48.46 per barrel on the New York Mercantile Exchange, retreating from an intraday high of $49. That was 24 cents below the Aug. 19 peak Nymex settlement price. Adjusting for inflation, today’s prices are still about $8 below the level reached just before the first Persian Gulf war.

The possibility of the government loaning oil to refiners comes as oil production in the Gulf of Mexico continues to lag by 27 percent below normal at 1.2 million barrels per day, according to the federal Minerals Management Service. The agency said 9.6 million barrels of oil have been lost since Monday, when offshore producers began evacuating crews.

U.S. oil supplies typically grow this time of year as gasoline demand tapers off and refiners briefly shut down to perform maintenance. But with an additional 1.5 million barrels per day of supply lost last week because of shipping delays, refiners have had to use oil held in storage in order to produce gasoline, heating oil and other fuels.

While the Bush administration sought to help refiners, energy analysts and traders said any assistance would not reverse the broader trends that have kept prices high all year.

Fadel Gheit, senior vice president of oil and gas research at Oppenheimer & Co. in New York, said lending oil from the SPR to refiners is “too little, too late.”

Mr. Gheit also blamed President Bush for contributing to today’s soaring prices through his policy of augmenting the country’s emergency stockpile at a time when global demand and prices are high.

“He scared China and India and Korea and everybody else that we were anticipating supply shortages,” Mr. Gheit said, leading them to buy more oil than they needed and artificially inflating global demand. “When somebody spots the mayor loading up on bottled water in the supermarket, guess what they’re going to do?”

In the past, Mr. Bush has resisted calls to tap into the reserve, located in Texas and Louisiana, in an effort to counter soaring prices. Instead, the White House has said that filling the reserve to its maximum 700 million barrels is a matter of national security and should not be interrupted.

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