LONDON, Sept 2: Oil prices fell close to $2 a barrel on Friday as Europe prepared to tap one million barrels a day of gasoline from emergency stockpiles to relieve an energy crisis threatening the United States.
Storage tanks have run down in the world’s biggest consumer after Hurricane Katrina tore at the heart of the US refining sector in the Gulf of Mexico on Monday and shut in a million barrels of daily gasoline output.
As the crisis deepened on Friday, President George W. Bush ordered the release of 900,000 barrels per day (bpd) of US crude and asked European members of the International Energy Agency (IEA) to put 1.1 million bpd of gasoline in the market.
US crude was off $1.87 to $67.60 at 1658 GMT, after dropping to $67.35. NYMEX will be shut on Monday for the US Labour Day holiday that marks the end of the driving season.
London Brent was down $1.62 at $66.10.
“Obviously this is good news for the US consumer. The market should be comforted and prices should react accordingly,” said Michael Wittner, head of energy market research at Calyon.
“But the market must understand that it will be more than three weeks before the oil from Europe reaches US shores.”
Europe already has booked up to 30 cargoes of gasoline to ship to the United States, leading brokers to warn of an impending vessel shortage.
The Paris-based IEA says it is still consulting members and awaiting a report on the extent of Katrina’s damage to US Gulf refiners before deciding on a stock release.
But European allies said they were prepared to spring to the rescue of the United States. Germany, Spain, France and Italy said they would back a request by the IEA, coordinator of emergency reserves for 26 OECD countries, to dip into stocks.
German Chancellor Gerhard Schroeder said a total release of 60 million barrels over 30 days was under consideration.
“We assume that would lead to there being sufficient energy reserves in the market and, second, we would wish the pressure on the prices of oil products to be lessened,” Schroeder said.
Gasoline prices, which have led the market’s gains on fears that already low stockpiles would be squeezed severely, traded 21.90 cents lower at $2.19 a gallon.
—Reuters