OPEC chief urges US to use emergency oil reserves

OPEC president Mr Purnomo Yusgiantoro said today he had urged the US to use its strategic petroleum reserves (SPR) to bring down…

OPEC president Mr Purnomo Yusgiantoro said today he had urged the US to use its strategic petroleum reserves (SPR) to bring down oil prices.

The Bush administration has consistently rebuffed calls to use the reserves - set up by Congress after the 1970s Arab oil embargo as a counterweight to OPEC's market power - to lower prices, saying that only a severe disruption in supply would warrant a release.

Oil prices have soared around 70 per cent to over $50 a barrel this year on unexpectedly strong demand growth that has pushed global production to its limit, leaving the Organisation of the Petroleum Exporting Countries little spare capacity to cool prices.

Purnomo has asked non-OPEC producers to increase production, although they typically pump at full capacity anyway, but the request to Washington is unusual as the cartel usually regards government stockpiles as a threat to its own market control.

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"The OPEC president has the mandate to make unilateral approaches on behalf of the whole organisation," said an OPEC official.

"He has already called on all producers to raise output, so it's not really a departure from that policy. It is an irony though."

Many OPEC members now say that prices are beyond their control and worry that sustained higher costs could eat into future demand growth by spurring use of alternative fuels.

The last major release of the SPR, which currently holds 670 million barrels of crude or around 65 days worth of US imports, was in 2000 and helped bring an end to a rally that saw prices bound from $10 to nearly $38 in just 20 months.

This autumn Washington has loaned 5.4 million barrels of sweet crude oil from the emergency stockpile to five refiners to offset supplies disrupted by Hurricane Ivan in mid-September.

Despite record-high price, the Bush administration has pressed ahead with plans to gradually fill the underground salt caverns that hold the reserve to capacity, with plans to add 22 million barrels through next April.

The International Energy Agency (IEA) said on Tuesday the US did not need to suspend crude oil shipments to its SPR to put more winter heating fuel on the market, because refineries have plenty of oil already.