OPEC Asks U.S. to Use Strategic Oil Reserves

OPEC took the unprecedented step of urging the United States to tap its emergency crude reserves to bring down world oil prices.

Purnomo Yusgiantoro, the president of the Organization of the Petroleum Exporting Countries (search), said on Wednesday he had approached Washington to suggest the move to force prices down from $55 a barrel.

"We had communication with them. I asked them to use their reserves," Purnomo, Indonesia's oil minister, told reporters in Jakarta. He did not say what Washington's response was.

In Washington, a White House spokesman said the Bush administration would not use the Strategic Petroleum Reserve (search) (SPR) to influence market prices.

"We've seen the news reports (about the OPEC request)," White House spokesman Trent Duffy said. "But the Strategic Petroleum Reserve, we've made it clear, is not to be used to manipulate market prices. It is America's emergency reserve for times of severe market disruptions."

The Bush administration has repeatedly said that the emergency stockpile exists for a severe oil supply disruption, in line with the policy of the International Energy Agency (search) (IEA), the group that coordinates policy on oil reserves for 26 industrialized nations. The U.S. reserve was created after the 1973 Arab oil embargo jolted the American economy.

Oil's 70 percent price rise this year has been fired by rapid demand growth, particularly from China, that has eaten up most of the spare capacity held by OPEC producers. A shortage of refining capacity worldwide also has helped drive up prices.

Purnomo's request to Washington is unusual as in the past OPEC has regarded government stockpiles as a threat to its own market influence.

Before the U.S.-led invasion of Iraq last year, leading producer Saudi Arabia raised output to prevent a supply shock and convinced the United States and other consumer countries that there was no need for a release of their strategic stocks.

But now the cartel which controls around half world oil exports worries that sustained higher prices could blunt demand growth by hurting the world economy and spurring investment in alternative fuels.

"The OPEC president has the mandate to make unilateral approaches on behalf of the whole organization," 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."

The last major release of the U.S. SPR, which holds 670 million barrels of crude, was in 2000 and helped bring an end to a rally that saw prices jump 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 prices, the Bush administration has pressed ahead with filling the underground salt caverns that hold the reserves, planning to reach full capacity next April.

The IEA said on Tuesday it agreed Washington did not need to suspend crude oil shipments to its SPR because refineries were adequately supplied with crude.

"As far as I know the shipments (to) the reserves are crude, and the market now does not need additional crude," said IEA Executive Director Claude Mandil.

But Mandil said that an extremely cold winter might warrant a release of heating oil from consumer country reserves.