BLBG:France Says Agreement on Use of Emergency Oil Stocks Is Closer
France said governments are moving closer to an agreement on a release of oil from emergency stockpiles to stem gains in crude that have driven prices to highest levels in three years.
The prospects of an accord between the U.S. and Europe on tapping strategic reserves are “good,” French Premier Francois Fillon told France Inter Radio today. U.S. President Barack Obama and U.K. Prime Minister David Cameron discussed the move earlier this month. France will only use its oil reserve in coordination with other countries, Finance Minister Francois Baroin said on Europe 1 radio.
“There is definitely increasing talk about releasing stocks, and now they are talking so much, it’s going to be hard not to do something,” Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland, said by phone. “Oil prices are rising, which is a threat to the economic recovery, so pressure is growing on governments. The Saudis aren’t acting, so the only thing left is to release stocks.”
Rising oil costs threaten to crimp the global economic recovery and price pressure may increase as the U.S. and European Union tighten sanctions against Iran, forcing nations to cut purchases of crude from the Islamic republic. The Paris- based International Energy Agency, adviser to 28 consuming nations, coordinated the release of 60 million barrels of crude and oil products in June after Libyan output was disrupted by an armed uprising against Muammar Qaddafi.
Tighter Sanctions
Oil has risen 12 percent this year on concern that demand will outstrip supply amid tightening sanctions on Iran and output disruptions in Sudan, Yemen, Syria and the North Sea. Brent crude for May settlement on the ICE Futures Europe exchange in London was at $124 a barrel, down 16 cents, as of 10:51 a.m. local time.
Iran, the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, may lose crude exports of as much as 1 million barrels a day because of the ban by the U.S. and the EU, the IEA said in a report this month.
The Obama administration hasn’t made a decision on whether to tap its Strategic Petroleum Reserve nor made any specific proposal to allies, a White House official said yesterday.
“While this is an option that remains on the table, no decisions have been made and no specific actions have been proposed,” Josh Earnest, deputy White House press secretary, said in Washington.
Tapping the Stockpile
An IEA official, asking not to be identified citing the agency’s policy, declined to comment on what the French ministers said. The IEA has no plans to issue a statement today, the official said.
The U.S. government has proposed releasing fuel from strategic stockpiles to curb rising prices, French Industry Minister Eric Besson said yesterday.
“We can reasonably expect it and it would be a good thing for the non-producer countries,” Fillon said. “There are good prospects for an accord, notably between the U.S. and Europe. We can’t do it alone.”
The French government, which is seeking re-election next month, is becoming increasingly vocal in its calls for the use of reserves to reduce fuel prices.
“The rise in government communication around a strategic release is reflective of the domestic political context, notably in the U.S. and France, which are in presidential election years,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “The use of strategic stocks is to bridge the supply gap in the event of a supply disruption, not to manipulate prices.”
Hurricane Katrina
France is waiting for a report from the IEA on inventories before deciding on such a move, Budget Minister Valerie Pecresse said yesterday at a press conference. “France is accompanying the U.S. and U.K. in the IEA consultation, which could allow the release of strategic oil reserves in order to break the rising price spiral,” she said.
The agency also made supplies available during the 1991 Persian Gulf War and when Hurricane Katrina damaged oil rigs and refineries in the Gulf of Mexico in 2005.
There is “no rational reason” for prices at current levels and Saudi Arabia would like to see them fall, the kingdom’s Oil Minister Ali al-Naimi said yesterday in an editorial published in the Financial Times, echoing comments he made to reporters in Doha, Qatar on March 20.
To contact the reporters on this story: Ayesha Daya in Abu Dhabi at adaya1@bloomberg.net; Gregory Viscusi at gviscusi@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net.
