Oil, Gasoline Fall as Schroeder Says IEA May Release Reserves
Oil, Gasoline Fall as Schroeder Says IEA May Release Reserves
Sept. 2 (Bloomberg) -- Crude oil and gasoline futures fell after German Chancellor Gerhard Schroeder said the International Energy Agency is considering releasing oil from emergency stockpiles to ease U.S. shortages caused by Hurricane Katrina.
The IEA may release 2 million barrels of oil a day over 30 days, Schroeder told a news conference in Berlin. Earlier, European Union foreign policy chief Javier Solana said EU member countries are prepared to provide emergency reserves.
``It's quite a serious situation, so it's possible that with more oil coming into the market organized by the IEA, it will push prices a lot lower,'' said Kevin Blemkin, a broker with Man Financial in London. ``The question is how quickly this can come into fruition and benefit end-users. Gasoline is obviously where we have the main problem.''
Crude oil for October delivery slid $1.31, or 1.9 percent, to $68.16 a barrel on the New York Mercantile Exchange at 1:58 p.m. London time. Oil touched $70.85 on Aug. 30, the highest since futures trading began in 1983. It has gained 3.2 percent this week and 55 percent in the past year.
Gasoline for October delivery fell as much as 23.90 cents, or 9.9 percent, to $2.17 a gallon on Nymex, its first decline this week. It recently traded at $2.23. U.S. gasoline pump prices yesterday averaged a record $2.815 a gallon, according to the AAA.
``There is a deficit of supply so anything that comes from outside the U.S. is going to be required and will help the situation,'' said Craig Pennington, head energy analyst at Schroders Plc in London.
Oil May Rise
U.S. President George W. Bush yesterday encouraged Americans to save gasoline to limit shortages. He also relaxed environmental and shipping rules to ease fuel movements around the country. Katrina idled 11 percent of U.S. refining capacity, which may mean the amount of crude needed by plants will decline.
European oil ``would take two weeks to get to the U.S. and there's already panic buying,'' Pennington said. ``Queues are forming in gas stations and you could see artificially high demand and inventories being drawn as refineries remain shut down.''
Next week, crude oil may rise above this week's record on concern damage to oil platforms and refineries from Katrina will take months to repair, a Bloomberg survey showed.
Thirty-one of 61 analysts and strategists surveyed, or 51 percent, said oil will rise next week. Eighteen, or 30 percent, said prices will decline and 12 forecast little change.
The Gulf of Mexico receives more than half of U.S. oil imports and is home to about 50 percent of the nation's refining capacity. Power cuts, flooding and a lack of workers are hampering refiners' efforts to inspect plants and restore output.
`Assessing Damage'
``Before the pipelines can be started up, power has to be restored, people have to come back, and then we'll have to do an inspection of the pipelines,'' said Owen Kratz, chief executive of Cal Dive International Inc., an oil services company that performs undersea inspections. ``That's what will occupy most of our fleet, the first two months is just assessing damage.''
Gasoline futures have surged 21 percent this week and have surged 83 percent from a year ago. The September contract reached a record $2.92 before expiring two days ago. Pump prices are 52 percent higher than a year ago, AAA figures show.
U.S. consumers are likely to pay $3 a gallon or more for gasoline for at least ``the next six to eight weeks'' because of refinery damage, Ben Bernanke, President George W. Bush's chief economic adviser, said yesterday. Motorists formed lines as long as a mile at stations in Georgia on Aug. 31, draining pumps before the Labor Day holiday weekend.
Stockpiles Decline
U.S. average pump prices surged 36 cents overnight to a record $2.99 a gallon, said Brad Proctor, founder of GasPriceWatch.com, which calculates the price for regular gasoline based on reports by volunteer price-spotters.
Gasoline stockpiles in the U.S. have fallen for nine straight weeks and are at their lowest since November 2003. Inventories are 4 percent lower than the five-year seasonal average, Energy Department statistics show.
``At these levels, you are going to see some response from U.S. consumers,'' said Francisco Blanch, a senior energy strategist at Merrill Lynch & Co. in London. ``The situation in the gasoline market is critical. The most reasonable measure is to ask for the cooperation of European governments. That's what strategic reserves are there for.''
Bush temporarily waived the Jones Act, allowing foreign-owned tankers to transport gasoline between U.S. ports. The government also eased restrictions on the blends of gasoline and diesel, which vary with the season and from state to state for environmental reasons, allowing supplies to be allocated more easily where they are needed.
Output Disrupted
Hurricane Katrina, which swept over Louisiana, Mississippi, Alabama and western Florida Aug. 29 caused an estimated $25 billion damage. Reports of at least 185 dead in Mississippi alone are ``credible and we worry that we may go up,'' State Governor Haley Barbour said on CNN yesterday.
The storm shut 1.36 million barrels, or 90 percent, of the region's daily crude-oil output, according to the U.S. Minerals Management Service, which manages offshore resources. About 30 percent of U.S. oil production comes from platforms in the Gulf.
Royal Dutch Shell Plc, Europe's second-biggest oil company, said repairs are under way at the 225,000-barrel Motiva Convent refinery in Louisiana. It may restart next week.
The company's Capline pipelines are running at 75 percent of capacity and should be fully operational once power is restored to pumping stations in Mississippi, Shell said on its Web site.
European Shipments
BP Plc and Morgan Stanley are among companies planning to ship European gasoline to the U.S. As many as 10 tankers were booked this week to transport 363,000 metric tons, according to five shipbrokers yesterday. The total would equal about 130 million gallons, enough to fill 5 million Chevrolet Tahoe trucks. Other companies hiring ships include Chevron Corp. and ConocoPhillips, the brokers said.
``I don't think it's going to have a major impact,'' said Michael Davis, an analyst with Sucden U.K. Ltd., a London broker. ``Europe won't have enough spare anyway. The market has obviously reacted to long-term concerns.''
Exxon Mobil Corp. will receive 6 million barrels of oil from the Strategic Petroleum Reserve to counter supply disruptions, Energy Secretary Samuel Bodman said in a statement.
Valero Energy Corp., the largest U.S. oil refiner, said the department approved a 1.5 million-barrel loan from the reserve.
The reserve holds about 700 million barrels of crude oil in salt caverns along the Texas and Louisiana coasts. The government also has a 2-million-barrel heating-oil stockpile in the Northeast.
European emergency oil reserves are controlled by each of the EU's 25 member countries. Releasing stockpiles can be coordinated through the International Energy Agency.
To contact the reporter on this story: Alejandro Barbajosa in London at abarbajosa@bloomberg.net
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