US stock-piling Strategic Oil Reserves

Oil Prices Fuel Rise in Strategic Reserves
Monday, May 17, 2004

With crude oil trading above $41 a barrel and terrorism fears helping to inflate the price, the U.S. has quietly continued to fill its emergency reserves to the highest level ever -- an amount experts say could be used to bring prices down, Monday's Wall Street Journal reported.

To guard against shortages, the U.S. and other nations have a combined 1.4 billion barrels of oil stored away, as governments have been steadily adding to their stocks since the shock of Sept. 11, 2001. Experts say oil markets have ignored that supply amid fears terrorist activity could reduce Middle East oil exports. The market's apparent disregard for that safety net has some analysts questioning whether the U.S. should use the reserves -- or even just threaten to use them -- to help calm the market and signal to the Organization of Petroleum Exporting Countries that the U.S. won't tolerate actions to maintain high prices.

Terrorism fears have resulted in a so-called terrorism premium that has pushed up crude prices as much as $5 to $10 a barrel over what supply and demand would suggest, some experts say.

The rise of crude-oil prices will be the focus of attention this week when the world's oil producers and consumers gather in Amsterdam for the International Energy Forum, a summit to discuss the market and how to better manage energy supply and demand. Among other things, OPEC and the International Energy Agency will be grappling with why prices have soared, even though supplies seem adequate.
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Wall Street Journal Staff Reporter Susan Warren contributed to this report.