FUEL Oil prices rise as U.S. offers to tap emergency stash

Oil production in the Gulf of Mexico is 27 percent below normal.
WASHINGTON (AP) -- Oil prices inched closer to $50 a barrel Thursday even as the Bush administration offered to tap the nation's emergency stockpile of crude on behalf of refiners whose supply was disrupted by Hurricane Ivan.
It would be the first time the government lent oil from the Strategic Petroleum Reserve in almost two years.
While analysts said the impact on red-hot energy markets would ultimately depend on the amount of oil made available, they expected the size of any loans -- and the effect on prices -- to be small.
"If there is any oil loaned from the reserve, it will be minimal and certainly not enough ... to make up for oil production that continues to be lost on a daily basis or to kill the momentum of the current rally," said John Kilduff, senior oil analyst at Fimat USA in New York.
No details
The government did not say which refiners made the requests or how much oil they sought to borrow. An Energy Department spokeswoman said the agency would negotiate with the companies to make "a limited quantity" available.
Light crude for November delivery rose 11 cents to $48.46 per barrel on the New York Mercantile Exchange, retreating from an intraday high of $49. That was 24 cents below the Aug. 19 peak Nymex settlement price. Adjusting for inflation, today's prices are still about $8 below the level reached just before the first Gulf War.
The possibility of the government lending oil to refiners comes as oil production in the Gulf of Mexico continues to lag by 27 percent below normal at 1.2 million barrels per day, according to the federal Minerals Management Service. The agency said 9.6 million barrels of oil have been lost since last Monday, when offshore producers began evacuating crews.
Growth, typically
U.S. oil supplies typically grow this time of year as gasoline demand tapers off and refiners briefly shut down to perform maintenance. But with additional 1.5 million barrels per day of supply lost last week due to shipping delays, refiners have had to use oil held in storage in order to produce gasoline, heating oil and other fuels.
While the Bush administration sought to help refiners, energy analysts and traders said any assistance would not undo the broader market trends that have kept prices high all year.
Fadel Gheit, senior vice president of oil and gas research at Oppenheimer & amp; Co. in New York, said lending oil from the SPR to refiners is "too little, too late."
Gheit also blamed President Bush for contributing to today's soaring prices through the policy of augmenting the country's emergency stockpile at a time when global demand and prices are high.
Bush had criticized President Clinton's move in fall 2000 to tap the reserve, saying it was a political effort to help Democrat Al Gore, Bush's opponent in the 2000 election. Nevertheless, the Energy Department lent roughly 300,000 barrels of crude to Shell Oil in Oct. 2002 after Hurricane Lily.