[Reuters]
Oil prices tumble after U.S. move
Gore blasts OPEC 'promises' as cartel cautions others not to follow U.S.
MSNBC staff and wire reports
Sept. 25 — World oil prices eased Monday, as Vice President Al Gore defended his reversal on releasing oil from the Strategic Petroleum Reserve, telling NBC News he now supports the action because all OPEC has delivered are "10 months of promises."
STORY CONTINUES BELOW
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"SO FAR so good," Gore said of the drop in prices after President Bill Clinton's decision Friday to release 30 million barrels of oil from the nation's strategic reserve.
Oil prices continued to fall Monday after Clinton's move to avert a winter fuel crisis.
U.S. light crude on the New York Mercantile Exchange in early afternoon trading was 93 cents lower at $31.73 a barrel. In London, benchmark North Brent crude was 91 cents lower to $30.34 a barrel. Brent crude now is 13 percent below the decade-high of $34.98 a barrel set just a week ago while U.S. futures have tumbled 17 percent from a post-Gulf War peak of $37.80.
U.S. Energy Secretary Bill Richardson late Friday announced the release of 30 million barrels of crude from the 571 million-barrel Strategic Petroleum Reserve — the first use of the SPR since Iraq’s invasion of Kuwait in 1990.
Dealers said the size of the release came as a surprise and the price decline could accelerate in coming weeks.
“It will bring the price epicenter down. It will not bring a radically different situation but will fill in the gap in terms of market sentiment and remove panic,” said David Brown, chief economist at Bear Stearns in London.
He predicted $25 a barrel by the fourth quarter of this year.
“Given current oil inventories, we believe that the theoretical price for Brent should be around $27 — around $3 of the $6-$7 of froth has already been removed,” said Dresdner Kleinwort Benson in a note to clients.
The head of the west’s energy watchdog, the International Energy Agency, called the release “significant” and said prices could be expected to decline.
“It’s a significant volume of oil. It’s obviously more than the last increase in production announced by OPEC. It’s obviously going to have a downward effect,” IEA executive director Robert Priddle told Reuters.
He said that he knew of no other IEA member — the agency draws its membership from the Organization for Economic Cooperation and Development — that was considering tapping government stocks.
The European Commission in Brussels said European Union finance ministers might examine the possibility of using mandatory EU reserves as part of wider talks on oil prices when they meet Friday.
“For the moment there is no intention at a European level to use reserves,” said EC spokesman Gilles Gantelet.
The SPR release will add one million barrels a day to U.S. crude supply in October, 5 percent of the 20 million bpd the United States consumes each day.
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,” he said Sunday.
Gore had opposedreleasing oil 10 months ago when prices were also high, but he defended his support for the action now, and denied it had anything to do with election politics.
"We have had 10 months of promises from OPEC" to increase output," he said. "... We're not going to sit around and do nothing while consumers here are being charged these outrageously high prices when we have the ability to act and we're doing so."
Earlier, U.S. Energy Secretary Bill Richardson defended the action as well, saying the country is preparing for a potential national emergency this winter.
With crude oil stocks at their lowest level in nearly a quarter century, Richardson said on NBC's "Meet the Press" that the government's goal is to increase supply, not to manipulate prices.
But on "Fox News Sunday," Republican vice presidential nominee Dick Cheney repeated the GOP accusation that the release of oil from the nation's reserves is designed to score political points for Gore. Cheney accused the Clinton-Gore administration of not developing an energy policy.
OPEC has increased output three times this year, reversing supply curbs that drove prices up from a 22-year low of less than $10 a barrel in 1998.
If prices stay above $28 in October for a basket of OPEC crudes, the cartel at the end of the month could trigger another 500,000 barrels daily under its price stability mechanism.
OPEC 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, rather than a lack of crude 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 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.
More coverage
• Latest news
• Rising oil prices top World Bank, IMF meetings
• Economists warn of tinkering with oil reserves
ADVICE ON RESERVES
Meanwhile, OPEC's secretary general warned other nations not to use their reserves to try to push down prices.
"Those who hold reserves should be careful when they use them so they can be there for real emergencies," Rilwanu Lukman told a news conference ahead of the summit.
"It's not our business to interfere with what industrialized countries do with their reserves, but I don't know whether the current situation could be regarded as an emergency. It's not quite an appropriate use for it," Lukman said.
Richardson has said the United States was prepared to take further action if necessary to calm oil prices, which last week hit their highest level since the Gulf War. Prices have fallen sharply as the United States signaled it would release reserves, and European leaders called for measures to ease high prices.
Lukman said he hoped that the United States' move along with an 800,000 barrel per day increase OPEC will implement beginning October 1, would moderate prices, but he said the group would work to avoid prices falling back too far.
"We are not going to get pushed into putting more oil into the market than it needs," he said. "People forget that prices have come up from just $10 a barrel two years ago. No one felt sorry for OPEC then."
OPEC oil ministers meeting on Tuesday would not emerge with any new supply decision, Lukman said, adding that the group had the option to raise supply at the end of October under its price stability mechanism.
This week's summit will help OPEC's efforts to work together to manage oil prices, he said. "It could not have come at a better time for our organization. It will go a long way to strengthen us," he said.
He reiterated that OPEC believed high taxes in consuming countries, lack of refining capacity and oil market speculators were just as responsible for current high prices as a shortage of crude oil.
"It's all very well to blame OPEC. We are a very convenient scapegoat," he said. "We have taken steps to alleviate high prices and we believe prices will come down to a level us and our customers are happy with. People expect this to happen in five minutes. Time is required."
Strong prices were necessary to make sure oil producers invested enough in exploration and production to meet future demand, Lukman added. "Without good prices we may well end up with a shortage of capacity in the future," he said.
CRITICISM OF U.S. ACTION
Saudi Arabia, traditionally the closest U.S. ally among OPEC members, criticized Clinton's decision as "an election ploy requested by Al Gore." U.S. officials say the Saudis, the world's biggest oil producer, have since assured them they aren't too upset.
Iraq, with the world's second largest oil reserves, said Clinton's decision will only destabilize what it called "greedy markets."
OPEC ministers fear overproduction could plunge prices — as in 1998, when a $10-per-barrel price pushed Venezuela's 23 million people into a recession from which they are still struggling to escape. Venezuela gets 60 percent of its revenues from oil.
OPEC produces more than 40 percent of the world's petroleum and holds 75 percent of proven reserves.
CLINTON'S ANNOUNCEMENT
As part of his energy relief plan, Clinton on Saturday said he was providing $400 million in assistance for low-income people. He is also:
• Asking the Environmental Protection Agency to help states identify ways to use more and different kinds of heating oil in an effort to build inventories further.
• Directing federal agencies to make early contractual commitments to purchase heating oil to give wholesalers "the confidence to build inventories in advance." Wholesalers have not built up stocks, anticipating wholesale prices may decline later in the year.
• Asking state public utility commissions to make sure that factories and businesses that use heating oil as a backup keep adequate reserves.
The Associated Press and Reuters contributed to this report.
Oil prices tumble after U.S. move
Gore blasts OPEC 'promises' as cartel cautions others not to follow U.S.
MSNBC staff and wire reports
Sept. 25 — World oil prices eased Monday, as Vice President Al Gore defended his reversal on releasing oil from the Strategic Petroleum Reserve, telling NBC News he now supports the action because all OPEC has delivered are "10 months of promises."
STORY CONTINUES BELOW
Advertisements
"SO FAR so good," Gore said of the drop in prices after President Bill Clinton's decision Friday to release 30 million barrels of oil from the nation's strategic reserve.
Oil prices continued to fall Monday after Clinton's move to avert a winter fuel crisis.
U.S. light crude on the New York Mercantile Exchange in early afternoon trading was 93 cents lower at $31.73 a barrel. In London, benchmark North Brent crude was 91 cents lower to $30.34 a barrel. Brent crude now is 13 percent below the decade-high of $34.98 a barrel set just a week ago while U.S. futures have tumbled 17 percent from a post-Gulf War peak of $37.80.
U.S. Energy Secretary Bill Richardson late Friday announced the release of 30 million barrels of crude from the 571 million-barrel Strategic Petroleum Reserve — the first use of the SPR since Iraq’s invasion of Kuwait in 1990.
Dealers said the size of the release came as a surprise and the price decline could accelerate in coming weeks.
“It will bring the price epicenter down. It will not bring a radically different situation but will fill in the gap in terms of market sentiment and remove panic,” said David Brown, chief economist at Bear Stearns in London.
He predicted $25 a barrel by the fourth quarter of this year.
“Given current oil inventories, we believe that the theoretical price for Brent should be around $27 — around $3 of the $6-$7 of froth has already been removed,” said Dresdner Kleinwort Benson in a note to clients.
The head of the west’s energy watchdog, the International Energy Agency, called the release “significant” and said prices could be expected to decline.
“It’s a significant volume of oil. It’s obviously more than the last increase in production announced by OPEC. It’s obviously going to have a downward effect,” IEA executive director Robert Priddle told Reuters.
He said that he knew of no other IEA member — the agency draws its membership from the Organization for Economic Cooperation and Development — that was considering tapping government stocks.
The European Commission in Brussels said European Union finance ministers might examine the possibility of using mandatory EU reserves as part of wider talks on oil prices when they meet Friday.
“For the moment there is no intention at a European level to use reserves,” said EC spokesman Gilles Gantelet.
The SPR release will add one million barrels a day to U.S. crude supply in October, 5 percent of the 20 million bpd the United States consumes each day.
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,” he said Sunday.
Gore had opposedreleasing oil 10 months ago when prices were also high, but he defended his support for the action now, and denied it had anything to do with election politics.
"We have had 10 months of promises from OPEC" to increase output," he said. "... We're not going to sit around and do nothing while consumers here are being charged these outrageously high prices when we have the ability to act and we're doing so."
Earlier, U.S. Energy Secretary Bill Richardson defended the action as well, saying the country is preparing for a potential national emergency this winter.
With crude oil stocks at their lowest level in nearly a quarter century, Richardson said on NBC's "Meet the Press" that the government's goal is to increase supply, not to manipulate prices.
But on "Fox News Sunday," Republican vice presidential nominee Dick Cheney repeated the GOP accusation that the release of oil from the nation's reserves is designed to score political points for Gore. Cheney accused the Clinton-Gore administration of not developing an energy policy.
OPEC has increased output three times this year, reversing supply curbs that drove prices up from a 22-year low of less than $10 a barrel in 1998.
If prices stay above $28 in October for a basket of OPEC crudes, the cartel at the end of the month could trigger another 500,000 barrels daily under its price stability mechanism.
OPEC 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, rather than a lack of crude 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 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.
More coverage
• Latest news
• Rising oil prices top World Bank, IMF meetings
• Economists warn of tinkering with oil reserves
ADVICE ON RESERVES
Meanwhile, OPEC's secretary general warned other nations not to use their reserves to try to push down prices.
"Those who hold reserves should be careful when they use them so they can be there for real emergencies," Rilwanu Lukman told a news conference ahead of the summit.
"It's not our business to interfere with what industrialized countries do with their reserves, but I don't know whether the current situation could be regarded as an emergency. It's not quite an appropriate use for it," Lukman said.
Richardson has said the United States was prepared to take further action if necessary to calm oil prices, which last week hit their highest level since the Gulf War. Prices have fallen sharply as the United States signaled it would release reserves, and European leaders called for measures to ease high prices.
Lukman said he hoped that the United States' move along with an 800,000 barrel per day increase OPEC will implement beginning October 1, would moderate prices, but he said the group would work to avoid prices falling back too far.
"We are not going to get pushed into putting more oil into the market than it needs," he said. "People forget that prices have come up from just $10 a barrel two years ago. No one felt sorry for OPEC then."
OPEC oil ministers meeting on Tuesday would not emerge with any new supply decision, Lukman said, adding that the group had the option to raise supply at the end of October under its price stability mechanism.
This week's summit will help OPEC's efforts to work together to manage oil prices, he said. "It could not have come at a better time for our organization. It will go a long way to strengthen us," he said.
He reiterated that OPEC believed high taxes in consuming countries, lack of refining capacity and oil market speculators were just as responsible for current high prices as a shortage of crude oil.
"It's all very well to blame OPEC. We are a very convenient scapegoat," he said. "We have taken steps to alleviate high prices and we believe prices will come down to a level us and our customers are happy with. People expect this to happen in five minutes. Time is required."
Strong prices were necessary to make sure oil producers invested enough in exploration and production to meet future demand, Lukman added. "Without good prices we may well end up with a shortage of capacity in the future," he said.
CRITICISM OF U.S. ACTION
Saudi Arabia, traditionally the closest U.S. ally among OPEC members, criticized Clinton's decision as "an election ploy requested by Al Gore." U.S. officials say the Saudis, the world's biggest oil producer, have since assured them they aren't too upset.
Iraq, with the world's second largest oil reserves, said Clinton's decision will only destabilize what it called "greedy markets."
OPEC ministers fear overproduction could plunge prices — as in 1998, when a $10-per-barrel price pushed Venezuela's 23 million people into a recession from which they are still struggling to escape. Venezuela gets 60 percent of its revenues from oil.
OPEC produces more than 40 percent of the world's petroleum and holds 75 percent of proven reserves.
CLINTON'S ANNOUNCEMENT
As part of his energy relief plan, Clinton on Saturday said he was providing $400 million in assistance for low-income people. He is also:
• Asking the Environmental Protection Agency to help states identify ways to use more and different kinds of heating oil in an effort to build inventories further.
• Directing federal agencies to make early contractual commitments to purchase heating oil to give wholesalers "the confidence to build inventories in advance." Wholesalers have not built up stocks, anticipating wholesale prices may decline later in the year.
• Asking state public utility commissions to make sure that factories and businesses that use heating oil as a backup keep adequate reserves.
The Associated Press and Reuters contributed to this report.
