Oil Dives $1.20 After U.S. Taps Reserves adding to a $1.50 loss on Fridaygreenspun.com : LUSENET : TB2K spinoff uncensored : One Thread
Oil Dives $1.20 After U.S. Taps Reserves Monday September 25, 4:41 AM EDT By Jonathan Leff
LONDON (Reuters) - Oil prices slumped more than a dollar on Monday, adding to a $1.50 on Friday, after a U.S. decision to tap into strategic reserves interrupted this year's blistering price rally.
Brent blend crude oil futures tumbled $1.25 to $30.00 a barrel in early electronic trade -- the lowest level in a month. U.S. oil futures were down $1.28 at $31.40 a barrel.
On Friday, U.S. Energy Secretary Bill Richardson announced the release 30 million barrels of crude during October from the 571 million-barrel Strategic Petroleum Reserve (SPR).
Expectations of the move had taken $1.48 off the price of Brent just before Friday's close.
Richardson's announcement came a day after Vice President Al Gore had suggested tapping the reserves for only the second time since they were established in the mid-1970s.
Critics accused the White House of trying to help Gore win the November 7 presidential election, but the Clinton administration said the release was necessary to avoid a winter shortage of heating oil stockpiles, now near 24-year lows.
Brent crude is now down 14 percent from its decade high $34.98 a barrel set just one week ago while U.S. futures have tumbled 17 percent from a post-Gulf War peak of $37.80.
The SPR release is the equivalent of one million bpd during October, equal to five percent of the 20 million bpd in crude and refined products the United States consumes each day.
U.S. Energy Secretary Bill Richardson left open the possibility of dipping into emergency stockpiles again.
"After 30 days, after 30 million barrels, the president will make an assessment and see where we are," Richardson said on Sunday.
"While the release of SPR oil was a foregone conclusion, no one expected it to be of this magnitude before a review took place," brokers GNI Research said in a report, adding it "could well serve to push prices down to more moderate levels."
But with U.S. refineries already running near full stretch trying to replenish low heating oil and diesel inventories, the extra SPR crude might only have a limited impact.
"The impact...is much more psychological to the market than anything else," said Ken Miller of Purvin & Gertz in Houston.
OPEC PRESIDENT SAYS MOVE POSITIVE
OPEC President Ali Rodriguez called the SPR release a positive move that should reduce prices.
"The increase of one million bpd from the U.S. reserve, with the extra supply due on the market in October, will reduce speculation and we think that is positive," said Rodriguez, who is also Venezuela's oil minister.
The Organization of the Petroleum Exporting Countries agreed in September to increase production, the cartel's third hike in seven months, in an attempt to keep prices between $22 and $28 a barrel.
President Clinton's authorisation of the release came ahead of an OPEC heads-of-state summit in Venezuela on Wednesday and Thursday.
Despite its September 10 deal for a 800,000 barrel per day (bpd) output hike from October 1, the cartel has been under tremendous pressure from consumer nations to help rein in runaway prices that economists fear could stoke inflation.
But the group has argued that high prices -- which provoked widespread protests by truckers and farmers across Europe this month -- are the result of refinery bottlenecks, fuel taxation and oil market speculation, not a lack of supply.
While consumers like the United States, the world's biggest energy market, tremble at the thought of $40 a barrel oil as seen during the Gulf War 10 years ago, OPEC members quake at the idea of another crash to under $10 -- seen just two years ago.
In Prague on Sunday, an International Monetary Fund panel,including oil consumers and producers, agreed sustained high energy prices could slow world growth and urged producers to take further steps to create the conditions for growth.
"The committee is concerned that current oil prices, if sustained, could hamper global growth, add to inflationary pressures and adversely affect prospects for many countries," said a statement from the IMF's policy-setting International Monetary and Financial Committee.
-- cpr (firstname.lastname@example.org), September 25, 2000
cpr, has just indicated a temporary low.
-- Cave Man (email@example.com), September 25, 2000.