Oil down over IEA plan to tap reserves

26 August 2012, Sweetcrude, HOUSTON – OIL prices fell on Friday after a report that the International Energy Agency, IEA, is likely to tap strategic oil reserves as soon as September, dropping its resistance to a US-led plan.

US crude losses were limited because of the threat to Gulf of Mexico production from Tropical Storm Isaac and that potential supply disruption prompted selling of Brent positions and buying of US crude, Reuters reported, citing brokers.

The IEA, whose chief recently dismissed the need for a release, is now thought to have agreed to the idea, the industry journal Petroleum Economist said, citing unnamed sources.

Reuters reported last week that the White House had begun “dusting off” previous plans for a possible release from its Strategic Petroleum Reserve because it fears that the sharp rise in oil prices since June could undermine the effect of sanctions on Iran.

“Oil prices declined on word of a change of heart at the IEA on a coordinated release of global SPR barrels. The market has been very sensitive to speculation over a release, which, if it were to occur, would work to lower prices for a time,” John Kilduff, partner at Again Capital LLC in New York, told the news wire.

Tropical Storm Isaac took aim at flood-prone Haiti on Friday and was expected to become a hurricane when it churns into the Gulf of Mexico early next week, on a path that could see it make landfall anywhere from New Orleans to the Florida Panhandle.

BP Plc said it was shutting production at its Thunder Horse oil and gas platform in the Gulf of Mexico, the world’s largest, and other producers began storm preparations and evacuating nonessential personnel.

Another potential threat to supply looms after Norwegian oil services workers broke off wage talks with oil companies on Friday, taking the sector a step closer to its second strike within two months and leaving government mediation as the next formal step in the dispute.

Brent October crude fell $1.42 to settle at $113.95 a barrel, having dropped to $113 after reaching $115.28.

Brent fell 12 cents on the week, snapping a string of three straight weekly gains.

On Friday, US October crude fell only 12 cents to settle at $96.15 a barrel, having swung from $95.41 to $97.17, either side of the 200-day moving average of $96.75.

US crude managed a 14-cent weekly gain, its fourth straight rise. Prices have recovered after sliding below $78 a barrel in late June.

Brent’s premium to US crude fell to $17.44 a barrel, but increased to $19.09 before pulling back.

US gasoline and heating oil futures fell back, even with the potential for weather-related refinery disruptions along the Gulf Coast next week.

Oil had a muted reaction to another round of inconclusive talks between the United Nations nuclear agency and Iran.

The UN’s International Atomic Energy Agency said important differences remain with Iran after Friday talks about Tehran’s nuclear program and that there were no plans at this stage for further meetings.

Iran’s envoy said the talks made some progress, but differences remained.
Israeli Prime Minister Benjamin Netanyahu accused Iran of making “accelerated progress towards achieving nuclear weapons”, adding that it was “totally ignoring” Western demands to rein in its atomic program.

The violent conflict in Syria continued to send refugees fleeing the country.

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  • Tapping into available strategic reserves will only impact oil prices for a while. This is an election year in the US and the government is doing everything and anything within its power to keep voters happy and disposed towards the party. With sanctions on Iran in effect and the thirst for increased oil supply in China and India growing in arithmetic proportions, it only a matter of time before we are back to business as usual.