White House sees possible oil loan from SPR

White House sees possible oil loan from SPR: report

London (Platts)--23Sep2004


The White House said Thursday that the Department of Energy was considering a
request from refiners on the US Gulf Coast to borrow oil from the Strategic
Petroleum Reserve to compensate for hurricane-related crude production
disruptions in the Gulf of Mexico, AFP reported. "That's something that's the
Department of Energy has been reviewing," White House spokesman Scott
McClellan told reporters, quoted by AFP. "They have been reviewing requests
from Gulf Coast refiners to borrow, for a short period of time, small
quantities of oil from the Strategic Petroleum Reserve to make sure that our
system continues to operate until production and imports can resume." A source
who is informed about the energy department's plans told Platts Wednesday the
DOE would lend crude--either directly from the SPR or from deliveries slated
for the SPR--to two or three refiners. The SPR currently holds about 670-mil
barrels. The Bush Administration is moving to fill the stockpile to its
700-mil barrel capacity.

US crude prices had eased in recent weeks from highs in August of close to
$50/bbl, although the energy department's statistics arm, the Energy
Information Administration, said earlier this month that it did not expect the
average monthly price of WTI to fall below $40/bbl until the middle of next
year. But the energy department's announcement Wednesday of a 9.1-mil barrel
draw in US crude stocks last week sent prices soaring back above $48/bbl.
"We've always said that the Strategic Petroleum Reserve was set up to protect
against physical disruptions of oil supplies, such as national emergencies or
natural disasters, and not to manipulate prices or for political purposes,"
AFP quoted McLellan saying. He said Hurricane Ivan had affected oil imports
and on Gulf of Mexico production and that refiners' access to crude supplies
had been limited. "So that's something the department of energy has been
reviewing," he said.

McLellan said oil had been loaned on a short-term basis in the past. In 2002,
he said "there was a short-term loan of oil in response to the disruption
associated with [Hurricane] Lily." Shell borrowed 300,000 barrels of SPR crude
in the autumn of 2002 to help cover the shortfall caused by Hurricane Lily.
Under the terms of that loan, Shell was to supply back to the SPR a comparable
grade of oil within 60 days. The US Minerals Management Service, meanwhile,
has estimated that lost crude production as a result of Hurricane Ivan
currently stands at 578,411 b/d.

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