UPDATE 4-U.S. loans emergency oil to refiner after Isaac

Sat Sep 1, 2012 1:58am IST

Related Topics

Stocks

   

* Loan of 1 mln barrels not expected to move oil prices

* White House considers large tap, no decision yet

* Marathon refinery at reduced rates after Isaac

* No other refiners asked DOE for oil

By Timothy Gardner and Joshua Schneyer

WASHINGTON/NEW YORK Aug 31 (Reuters) - The United States will loan 1 million barrels of crude from emergency reserves to Marathon Petroleum Corp after one of its refineries slowed output in the wake of Hurricane Isaac, the Department of Energy said on Friday.

The Obama administration has been considering plans to tap a larger amount of crude from the 727 million barrel Strategic Petroleum Reserve as tension over Iran's nuclear program and Western sanctions on Tehran have boosted oil prices.

The White House is in the data-gathering process and would not likely make a decision on a larger tapping of the reserves until early September, sources have said.

Friday's decision by the DOE was much narrower than a large drawdown, which typically involves talks with oil consumer and producer countries. Energy Secretary Steven Chu has the power to loan small amounts of oil from the reserve following storms and other events that reduce petroleum supplies.

"This emergency loan from the Strategic Petroleum Reserve will help ensure Marathon's refining operations have the crude oil they need to continue operating," Chu said in a statement.

The DOE said it continues to "keep all options on the table to address additional or sustained oil supply issues."

An analyst said the loan of sweet crude oil to Marathon should not have a big impact on markets.

"This is a small, limited time swap in response to Isaac and should not have a major impact on crude prices, although, as DOE noted, it is keeping the option of a larger release on the table for future or sustained disruptions," said Bob McNally, head of the Washington-based consulting firm the Rapidan Group.

Oil futures in New York rose about $1.50 after the loan announcement, to more than $96 per barrel.

The DOE has not received additional requests from other refiners along the U.S. Gulf Coast for oil loans, a source familiar with the talks said. If the agency gets more requests, it "will move expeditiously to review them" to ensure it is responding as quickly as possible to those hit by the storm, the source said.

Marathon said its 490,000 barrels per day refinery in Garyville, Louisiana, was running at reduced rates due to heavy rain but that it had not sustained significant damage.

Under the loan agreement, Marathon will return an equal amount of similar oil to the reserve within three months, plus additional barrels representing interest, the DOE said. The SPR will be ready to begin delivering oil to Marathon on Friday.

Exxon Mobil, Valero and Royal Dutch Shell also have refineries that were either still shut or were at reduced rates due to the storm.

Valero spokesman Bill Day said his company had not asked for oil from the reserve but it would continue to evaluate its needs. Bo th of its Louisiana refineries remained shut.

Isaac made landfall this week as a Category 1 hurricane but has since moved inland and weakened to a tropical depression.

BIG DRAWDOWN LAST YEAR

The Obama administration agreed to tap 30 million barrels of oil last year - less than two days of U.S. demand - as civil war in Libya took out about 1 million bpd of crude from the country. The drawdown was part of a wider sale of 60 million barrels coordinated with the International Energy Agency.

This year sanctions have reduced Iran's oil output the same rate as last year's Libyan crisis, spurring calls from Congress to push the White House to release oil. Countries in the West believe Iran is attempting to develop nuclear arms, while Tehran says its nuclear program is for energy and medical purposes.

Maria van der Hoeven, the IEA's chief, said in Norway this week she opposed a coordinated drawdown, citing adequate global supplies. Sanctions on Iran, "didn't come out of the blue," she added.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Press Event

Press Event

Modi takes tea, but no questions, in first press event as PM.  Full Article 

School Shooting

School Shooting

Two killed, four wounded in Washington state school shooting.  Full Article 

Sundar Pichai Elevated

Sundar Pichai Elevated

Google's Pichai to oversee major products and services.  Full Article 

Need For Reforms

Need For Reforms

Euro zone risks "relapse into recession" without structural reforms - Draghi.  Full Article 

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Health Of Lenders

Health Of Lenders

25 European banks set to fail health checks - sources.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage