Oil prices fell to just above $48 on Friday after the U.S. government said it would lend refiners crude from the Strategic Petroleum Reserve (SPR), but traders deemed the loan too small to have a lasting impact. U.S. light crude was down 19 cents at $48.27 a barrel, after hitting as high as $49 on Thursday, 40 cents below the $49.40 record set on Aug. 20. It settled up 11 cents at $48.46 a barrel. In London, Brent crude had also set a new record at $45.75 a barrel on Thursday , before settling at $45.13, on nagging fears over a U.S. oil supply shortfall caused by Hurricane Ivan. That shortage and the spiralling prices prompted the Bush administration to start negotiations with refineries that wanted to borrow oil from the emergency stockpile, with loans set to be approved to two refineries for two to three weeks. "I have authorised these negotiations in response to the physical disruption of offshore oil production and imports in the Gulf Region caused by Hurricane Ivan's destruction," Energy Secretary Spencer Abraham said.
The U.S. Energy Department is set to approve the loans from the 670-million-barrel SPR, once the details are worked out with the refineries, a congressional source briefed on the pending decision told . "I don't see any impact in the market in this case. It's just a loan and must be repaid in a short time. In the long term, it's negligible," said Tetsu Emori chief commodities strategist with Mitsui Bussan Futures in Tokyo. Two refiners have asked to borrow 100,000-200,000 barrels and 1 million to 2 million barrels from the SPR, respectively. The last time Washington loaned oil from the SPR was in late 2002, when Hurricane Lili disrupted shipments.
WINTER
U.S. crude oil inventories are at their lowest since Feb. 6 as shipment disruptions from Hurricane Ivan cut down imports by almost 1.5 million barrels per day (bpd) to about 8.4 million bpd. Ivan shut a total of 9.6 million barrels of crude oil and 41 billion cubic feet of natural gas in the Gulf of Mexico, the U.S. Minerals Management Service said. The weather in Japan and South Korea is forecast to be normal or colder-than-normal, while stocks of kerosene, used as heating fuel are at around 10-year lows. "We are expected to be in for a cooler cycle this winter and intensifying demand for kerosene, which is already nearly 30 percent below last year's stocks, and we expect a similarly bullish situation in the U.S. and Europe," Emori said, adding that the fundamentals are pointing to U.S. crude prices breaking above $50 and might even head towards $60 a barrel. U.S. heating oil prices scaled new all-time peaks at $1.3630 a gallon on Thursday before shedding 1.09 cents on Friday, as inventories of the product fell by 1 million barrels last week at a time of year it should start to build. A possible strike among oil workers in Brazil and rebel fighter threats to oil infrastructure in Nigeria added momentum to surging prices because any glitch in the supply chain could spark a major disruption.///