FOCUS-US gets tough with Saudis over oil supply
By Tom Doggett
WASHINGTON, Feb 11 (Reuters) - Saudi Arabia's decision to trim crude oil deliveries to the United States, coming at a time when U.S. supplies are at their lowest in a generation, drew a sharp rebuke from the Clinton administration on Friday.
The surprise move by Saudi Arabia, one day after the administration announced measures to try to squeeze more supplies into the U.S. market, sent crude oil prices soaring.
Crude futures on the New York Mercantile Exchange briefly jumped to $29.94 a barrel, just one cent below the nine-year high recorded last month. Prices declined later in the day to close at $29.44 a barrel after Gulf and Venezuelan oil sources indicated OPEC might increase its production.
U.S. Energy Secretary Bill Richardson used the strongest language he had used to date to criticize Saudi Arabia, a long-time U.S. ally and the most influential member of the Organization of Petroleum Exporting Countries (OPEC).
``This action by the Saudis represents a firm step in the wrong direction,' Richardson said in a statement. ``The U.S. market needs more (oil) supply, not less.'
Asked if Richardson's comments meant the administration would put more pressure on OPEC to increase oil output, a state department spokesman would only say: ``We stay in touch with oil-producing nations on a regular basis.'
Saudi Arabia told its U.S. customers on Friday that they would get about 25 percent less crude oil in March than standard contract volumes. Shipments for European buyers will be cut even more.
But the cuts are somewhat less dramatic than they appear, according to market sources. In recent months, U.S. buyers have already been subjected to volume that is about 21 to 23 percent less than standard contract volumes, they said.
U.S. inventories of petroleum have steadily shrunk, and crude stocks now stand at their lowest level since 1976.
With supplies dwindling and prices rising, Congress has been putting pressure on the Clinton adminstration to get tough with OPEC. One year ago, the cartel slashed daily oil production by several million barrels a day, a move which succeeded in nearly tripling U.S. oil prices.
RICHARDSON URGES ``IN THE STRONGEST TERMS'
OPEC members will meet at the end of next month to decide whether to extend the cuts or ramp up production.
``I urge -- in the strongest terms -- that all oil producing nations recognize that the world needs more oil, not less, and needs it sooner rather than later,' Richardson said.
Venezuelan sources said OPEC would likely agree in March to progressive increases in its production quotas starting in the first half of this year.
One source said the cartel was considering a decision to hike output by 1.7 million barrels per day from June, then consider in September another increase of 500,000 to one million barrels a day.
Richardson will travel to Mexico, Saudi Arabia and Kuwait later in the month to discuss volatility in the oil market. However, his planned trip to Venezuela to raise similar issues with that country's oil minister was canceled with no explanation, an energy department official said Friday.
The Clinton administration has refused to release oil from the Strategic Petroleum Reserve to lower crude prices, arguing that federal law allows the reserve to be used only if there is a severe disruption in supplies.
``We don't think manipulating, or using the Strategic Petroleum Reserve in a way to manipulate prices would be consistent with the statute,' White House spokesman Joe Lockhart said Friday.
The emergency reserve, which holds 569 million barrels of oil, was created by Congress in the mid 1970s after the Arab oil embargo that jolted the U.S. economy.
Also in oil: Venezuela
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