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UK to Release 3 Per Cent of Oil Reserves to Bolster Market

Posted on: Saturday, 3 September 2005, 09:00 CDT

THE United Kingdom is to release 73,000 barrels of oil reserves a day for the next month to help the global market cope with the after- effects of the devastating Hurricane Katrina, it was announced yesterday.

The move is part of a decision by the Paris-based International Energy Agency (IEA) to make emergency plans to release two million barrels of oil reserves.

The UK's contribution amounts to about 3 per cent of this country's total reserves.

This is the first time reserves have been released since the Gulf War more than a decade ago. Prime Minister Tony Blair was told about the decision yesterday and has been briefed on the crisis.

Energy minister Malcolm Wicks said it was important to have a global response to the disaster.

He said: "We have all been saddened by the tragedy still unfolding in the United States. This co-ordinated response will free up extra supplies to help the market deal more effectively with the disruption caused by Katrina.

"This is a global oil market and so a multilateral response is the right way forward."

He added the aid would not have an affect on the British consumer. He said: "There is absolutely no reason to think that UK industry cannot continue to meet our needs. Stocks over and above normal demand are held specifically to enable us to respond to disruptions of this kind."

Hurricane Katrina damaged or displaced an estimated 58 Gulf of Mexico oil platforms and drilling rigs, according to the American Petroleum Institute. Among those, 30 rigs and platforms have been reported lost.

The US has lost production of about 42 million gallons of petrol a day, equal to 10 percent of its normal consumption, because Hurricane Katrina shut down oil refineries and forced others to reduce runs, according to government estimates.

Nine major oil refineries remained offline in Louisiana and Mississippi, and several other facilities had reduced output. That cut about 2 million barrels per day (bpd) of US refining capacity, which equals approximately 1 million bpd of petrol not being produced, the Energy Information Administration said.

One barrel holds 42 gallons so that translates into a loss of 42 million gallons of daily petrol output, according to EIA calculations.

"This represents about 10 per cent of the nation's consumption, and is a major drop in the normal flow of gasoline [petrol] through the system," the Energy Department's statistical arm said in its latest assessment of the hurricane's lingering effects on the US energy sector.

The EIA said some of the refineries should be able to resume operations in one to two weeks, but other facilities may take several months to come back online.

Oil prices fell yesterday in response to the move to release oil reserves.

US light crude fell dollars 1.57 to dollars 67.90 a barrel.

"IEA member countries are acting in solidarity with the US in addressing this loss and restoring confidence to the oil market," the IEA said.

President Bush has urged Americans to be prudent in their use of fuel over the coming days and weeks, telling people not to buy gas unless they need it over the Labor Day holiday weekend.

"Listen, we're going to have a problem this weekend when it comes to gasoline but we're addressing it," Bush told reporters while touring damage from the hurricane in Biloxi, Mississippi.

Source: Scotsman, The

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