NEW YORK (Dow Jones) -- Oil futures prices were roiled Thursday
by a report that the U.S. had reached an agreement to release oil
from its emergency reserves -- only to be calmed less than an hour
later by a White House denial.
A relatively quiet morning was interrupted by a Reuters news
service story that the U.K. expected the U.S. to act soon to
release oil from the Strategic Petroleum Reserve -- or SPR, the
nation's emergency oil stockpile -- in the face of rising prices.
The report came a day after President Barack Obama and British
Prime Minister David Cameron said they would keep open discussions
about a possible release of oil reserves, a U.K. official familiar
with the talks said.
Oil futures on the New York Mercantile Exchanges dropped more
than $2 to a one-month low of $103.78 on the report. But most of
those losses were erased after the White House spokesman Jay Carney
called the report "inaccurate" and "false" and denied any deal for
an oil release was in place.
The release of the oil would increase global supplies and drive
the price of oil lower. Despite the denial, some say the damage had
already been done to the bullish outlook for prices.
Tensions between Iran and the west, over Tehran's nuclear
program, have pushed U.S. crude prices 11% higher since November as
traders fretted that Iran could move to disrupt supplies traveling
through the Strait of Hormuz, through which a third of the world's
seaborne crude passes. Thursday's hubbub reminded traders that
governments stand ready to add to supplies in the event of an
Iran-related event.
"With this idea in the back of its mind, I think the market's
going to be a little sketchy going forward," said Carl Larry of the
Oil Outlooks and Opinions newsletter of the possibility of a
release of oil reserves.
"Nobody wants to take a risk" of betting on prices going higher,
he added.
April-delivery light, sweet crude oil on the New York Mercantile
Exchange settled 32 cents lower at $105.11 a barrel.
ICE North Sea Brent crude for April settled $1.42 lower at
$123.55 a barrel.
The U.S. was the linchpin of a move by the International Energy
Agency in June 2011 to release 60 million barrels of crude oil from
emergency stockpiles amid concerns over a supply shortage caused by
the Libyan civil war. The U.S. provided half of the emergency oil
released then.
Rising prices of crude and crude products like gasoline, along
with the continuing standoff between Iran and the west, has stirred
market chatter that a similar release may be forthcoming.
North Sea Brent crude oil prices have recently traded to near
their highest levels since 2008 and gasoline prices in the U.S.
have climbed and are widely expected to top $4 a gallon nationwide
for the first time since summer 2008.
Still, some analysts said that despite talk of a release from
emergency reserves, there isn't a shortage of oil.
"A shortage of crude or products does not currently exist within
the U.S., and European product markets appear adequately supplied,"
said Jim Ritterbusch, president of Ritterbusch and Associates, a
Galena, Ill., research firm.
Tony Rosado, broker at GA Global Markets, said Nymex crude could
soon slip to $98 a barrel, for the first time since early February
as the hot market is chilled by talk of stock releases.
But Gene McGillian, broker and analyst at Tradition Energy in
Stamford, Conn., said after all the frenzy over the SPR talk, "all
the same factors are going to continue to provide support,"
including worries about a disruption of Iranian oil supply, which
he said adds a $10-to-$15 a barrel premium to prices.
On Wedneday, the head of the International Energy Agency, the
oil policy watchdog for the major industrialized nations, said that
an oil release isn't now needed. "At this moment, there is no
reason to use it," said Maria van der Hoeven, IEA executive
director. She said demand is slipping due to slower economic
growth, but there are signs of a tightening market as global
inventories are below five-year averages for a seventh straight
month in the major industrialized nations.
Saudi Arabia, the world's largest oil exporter, has lifted
output to a three-decade high of 10 million barrels a day and Oil
Minister Ali al-Naimi said the country stands ready to cover "any
shortfalls -- perceived or real -- in crude oil supply."
In the U.S. company-held inventories of crude oil and petroleum
products are sufficient to meet 56 days of current demand, four
days above the five-year average, but at the same level as last
June, when the U.S. led an IEA move to tap emergency stocks,
government data for March 9 show.
Last June, when the U.S. sold 30 million barrels of oil from the
Strategic Petroleum Reserve amid Libya supply worries, stock cover
was three days above the five-year average.
Meanwhile, the near 700 million barrels of SPR crude is
sufficient to cover 82.5 days of US net oil imports, the highest
level since 1992, according to Energy Information Administration
data. The level of cover at the end of 2011 rose from 77 days in
2010 as net imports dropped more than 1 million barrels a day and
the U.S. became a net exporter of petroleum products for the first
time in 60 years.
The relatively high level of inventory could provide an argument
against critics who say the U.S. would be vastly depleting its
emergency stocks if the Obama administration decides to tap the
reserve, as it did last June during Libya's civil war. A similar
30-million-barrel drawdown in the reserve would put stocks at near
666 million barrels. Measured against the EIA's projection of 2012
net imports, reduced SPR stocks would cover 79 days of net imports
at the end of 2012, or two days more than they did at the end of
2010 and eight days more than the five-year average level.
In Thursday's trading reformulated gasoline blendstock futures
for April settled 5.85 cents lower at $3.2885 a gallon. April
heating oil settled 3.93 cents lower at $3.2225 a gallon.
More information on settlements and highs and lows for futures
on Nymex and ICE platforms can be found by searching for the following
headlines:
Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close
-By David Bird, Dow Jones Newswires; 212-416-2141;
david.bird@dowjones.com
(Jarole A. Favole and Tennille Tracy in Washington, Dan Strumpf
in New York and James Herron in London contributed to this
article.)