Crude Oil Falls on U.S. Proposal to Allow the Sale of Strategic Reserves
London, Nov. 18 (Bloomberg) -- Crude oil fell after the U.S.
introduced legislation to allow the sale of supplies from its
emergency reserve in an effort to stall a rise in gasoline and
heating fuel prices.
Two U.S. senators yesterday introduced a proposal that would
clear the sale of oil held in salt caverns in Texas and
Louisiana, inventories that are enough to meet two months of
imports in the U.S., the world's largest energy-consuming nation.
A U.S. government sale ``can have a disproportionate effect
on sentiment in relation to the amount of oil that will be
released,' said Lawrence Eagles, an analyst at GNI Ltd. ``But we
haven't actually had the sale yet. We'll wait and see.'
Crude oil for January settlement fell as much as 27 cents,
or 1.1 percent, to $24.65 a barrel on the International Petroleum
Exchange in London. Crude oil for December delivery on the New
York Mercantile Exchange fell 20 cents to $26.40 a barrel in
electronic trading.
The reserve was established in 1975 to provide an emergency
supply of oil in the event of a crisis, such as the Arab oil
embargo of 1973. It currently holds about 573 million barrels of
oil -- equal to two months of imports -- according to the Energy
Department. The reserve has only been tapped once, in 1991, by
President George Bush during the Gulf War.
U.S. retail gasoline prices have risen 34 percent so far
this year and are close to a three-year high. Changes in retail
fuel prices tend to follow moves in futures markets.
Oil prices have more than doubled this year after the
Organization of Petroleum Exporting Countries and four other
nations slashed output by about 5 million barrels a day, or 7
percent, in April from February 1998 levels to boost prices and
force refineries to use up stored supplies.
Iraq
Oil prices were also pushed lower after Russia called
yesterday for the immediate removal of limits on Iraqi oil
exports under a United Nations program and a doubling of the
amount of export revenue the country can use to repair its
dilapidated oil industry, traders said.
Iraq, which is allowed to export $8.3 billion worth of oil
under a UN-sponsored exception to sanctions imposed after its
invasion of Kuwait in 1990, exported 2.2 million barrels a day
last month and accounted for about 3 percent of the world supply.
Iraq is the third-largest producer within OPEC and the only
member not participating in the output reduction campaign.
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