January 20, 2022

Global Oil Reserves Tapped in Effort to Cut Cost at Pump

The action is aimed at stabilizing global oil supplies and reducing energy prices for businesses and consumers, and by early afternoon futures contracts for West Texas intermediate crude oil were down $4.46 to $90.95 a barrel.

Of the total amount of oil to be released, about half would come from reserves in the United States, with the rest to be provided by other nations among the international agency’s 28 member states. Negotiations for the coordinated response have been going on in secret for weeks, according to a person involved in the talks. Similar unified action was taken in 1991 at the outbreak of the first Persian Gulf War.

“We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery,” said Energy Secretary Steven Chu in a statement. “As we move forward, we will continue to monitor the situation and stand ready to take additional steps if necessary.”

The total amount of oil to be released — 60 million barrels over the next 30 days — is relatively trivial, representing less than a single day’s global oil consumption. But it sends a number of signals to markets and countries facing particular distress because of the supply disruption caused by unrest in Libya and elsewhere in North Africa and the Middle East.

The release of 60 million barrels amounts to about 30 days of Libyan production. It will ease American demand for Nigerian and Algerian light sweet crude, which can go to the Europeans instead. Italy in particular was dependent on Libyan crude, buying 28 percent of Libya’s 1.5 million barrels a day of exports last year, according to the I.E.A. The United States purchased just 3 percent of Libya’s exports last year.

The move also allows President Obama to say that he is acting aggressively to deal with high gasoline prices at the start of the summer driving season.

An Obama administration official said that the release of the oil was driven by concerns about supply and the potential impact on the domestic and global economies, not by politics.

“This is about ensuring that the actions producers are taking and the actions taken by the consuming nations will address the supply disruption,” the official said, insisting on anonymity to describe internal discussions among the 28 members of the International Energy Agency. “This is about addressing supply disruption and its potential impact on global economic growth, and that’s the driving factor.”

The official said that the nations involved in the action would review its effect after 30 days to decide whether additional releases are warranted.

“The Strategic Petroleum Reserve is kept precisely for this purpose,” the official said. “The United States stands ready to do more as and if necessary to deal with this issue.”

The action is also a response to the Organization of the Petroleum Exporting Countries, which failed to reach an agreement on an oil output increase at its June 8 meeting to make up for the continuing supply disruption. After the meeting, Saudi Arabia and the Persian Gulf states split from other producers and agreed to pump as much as 1.5 million more barrels of crude per day until the end of the year to avoid additional stress on the global economy.

The Dow Jones industrial average lost 165 points at the opening of trading, shortly after the announcement from Paris, but some traders said the large drop was partially a reaction to a sharp increase in weekly claims for jobless benefits in the United States and a downbeat economic forecast from the Federal Reserve on Wednesday. By early afternoon the Dow was down about 160 points.

Even as the talks on the oil reserves proceeded behind the scenes in recent weeks, prices have come down a bit at American gasoline pumps. The average price of a gallon of regular gasoline has fallen to $3.61, the AAA Daily Fuel Gauge Report said Thursday, compared with $3.83 a month ago. A year ago, the price was $2.74 a gallon.

It is unclear how much more prices could come down, if at all, with the release of the reserve oil, which is not a large amount given that worldwide oil consumption is roughly 89 million barrels a day.

Christine Hauser contributed reporting from New York, Matthew Saltmarsh contributed from Paris and Clifford Krauss contributed from Houston.

Article source: http://www.nytimes.com/2011/06/24/business/24oil.html?partner=rss&emc=rss

Stocks on Wall Street Trade in Narrow Range

In early morning trading, the Dow Jones industrial average fell 8.33 points, or .1 percent. The Standard Poor’s 500-stock index rose 1.99 points, or 0.2 percent. The Nasdaq was up 7.88 points, or 0.3 percent.

Overseas markets rose slightly Wednesday after a late-afternoon rally a day earlier. The FTSE 100 index of leading British shares was up 1 percent, while Germany’s DAX rose 0.7 percent. The CAC 40 in France was 1 percent higher.

Dell rose slightly in early trading on Wednesday. The computer maker reported its earnings after the market closed Tuesday, saying its quarterly net income nearly tripled after it cut costs and increased profit margins.

Target reported its earnings on Wednesday morning, saying that first-quarter net income rose 2.7 percent in spite of weak sales because of a strong credit card business. The report beat Wall Street expectations, but the stock was down 1.2 percent.

On Wednesday afternoon, the Federal Reserve will release minutes from its April meeting, giving traders insight into its expectations for inflation. At its previous meeting, the Fed said it would end its Treasury bond-buying program in June as scheduled, and indicated that it expected interest rates would remain low for some time.

The prevailing view in the markets is that the Fed will not begin to raise interest rates until later in the year at the earliest, in contrast to the European Central Bank, which has already raised its borrowing costs and is expected to do so again in July.

The divergence in the two banks’ policies is one reason the dollar has been so weak against the euro recently, though the reemergence of European debt worries have weighed on the euro over the past couple of weeks.

By early afternoon London time, the euro was 0.1 percent lower at $1.4221. That is still strong but 9 cents below the 18-month high achieved earlier in the month.

Jörg Krämer, chief economist at Commerzbank, predicted that the Fed would wait until early next year before raising interest rates again.

“Its main motive for this reticence is the high unemployment rate, which, even though it has been falling in recent months, is still very high,” Mr. Krämer said. “The only reason for the Fed acting at an earlier point would be if inflation expectations surprised and suddenly took off.”

Earlier in Asia, Japan’s Nikkei 225 index rose 1 percent on indications that factory production is recovering from the slump after the March 11 earthquake and tsunami.

South Korea’s Kospi climbed 1.6 percent while Hong Kong’s Hang Seng rose 0.5 percent and Australia’s S. P./ASX 200 inched up 0.2 percent.

Mainland China’s Shanghai Composite Index rose 0.7 percent, and the smaller Shenzhen Composite Index advanced 0.5 percent.

Benchmark crude for June delivery was up $1.96 to $98.87 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 47 cents to settle at $96.91 per barrel on Tuesday.

Tuesday, the Dow fell as much as much as 170 points before paring back its losses and closing down nearly 70 points. Commodity prices recovered Tuesday after floods damaged wheat, corn and soybean fields, helping in the United States stocks rally.

Concerns about the global economy and a lower earnings forecast by Hewlett-Packard had spooked markets. The company’s stock fell more than 7 percent. Industrial companies like Caterpillar and Boeing also fell after a surprisingly weak manufacturing report.

Europe’s debt crisis and uncertainty generated by the arrest of the International Monetary Fund’s chief, Dominique Strauss-Kahn, also hurt market sentiment this week.

Article source: http://www.nytimes.com/2011/05/19/business/19markets.html?partner=rss&emc=rss