LONDON, 3 September 2005 — World oil prices slumped yesterday as the International Energy Agency and the US government pledged to release 60 million barrels of crude after Hurricane Katrina severely disrupted supplies.
The IEA said that all its member states had agreed to make available to the market two million barrels of their strategic oil reserves a day for an initial period of 30 days to offset disruptions from Katrina. US Energy Secretary Samuel Bodman said the United States would sell 30 million barrels of crude oil from its own Strategic Petroleum Reserve on the market from next week.
New York’s main contract, light sweet crude for delivery in October, fell $1.82 to $67.65 per barrel in early deals.
On Tuesday it had hit a historic high of $70.85, a day after Katrina battered the Gulf of Mexico.
In London, the price of Brent North Sea crude for October delivery lost $2.12 to $65.60 per barrel yesterday. It hit a record $68.89 on Tuesday.
The IEA executive director, Claude Mandil, said all 26 IEA member countries will take “collective action in response to the interrupted oil supplies in the Gulf of Mexico caused by Hurricane Katrina,” the Paris-based agency said in a statement.
Hurricane Katrina battered oil platforms in the Gulf of Mexico on Monday, leaving US refineries short of crude to turn into gasoline (petrol) and heating fuel.
Prices had initially fallen by more than a dollar yesterday, as crude production increased slightly in the United States, the world’s biggest consumer of energy. Colonial Pipeline, a transporter of petroleum products, on Thursday said that its network of pipelines between the Gulf of Mexico and the US northeast would be operating at 61 percent capacity from Friday compared with 40 percent the day before.
It added that capacity should rise to between 75 and 86 percent by the middle of next week. Meanwhile energy giant Royal Dutch Shell said Thursday that its Motiva refinery in Convent, Louisiana could restart refining its capacity of 225,000 barrels per day in about a week.
However, concerns remained yesterday.
The US keeps 700 million barrels of oil stored in four underground salt caverns on the Texas and Louisiana coasts to cushion oil markets during supply disruptions. The reserve was created during the 1970s oil shocks.
The IEA, grouping industrialized nations with strategic oil reserves, holds an estimated 4.1 billion barrels of public and industry oil stocks, of which about 1.4 billion barrels are government-controlled for emergency purposes.
