With oil near $50 a barrel, the Bush administration said on Thursday it would negotiate with refineries that want to borrow oil from the federal emergency stockpile to offset supplies disrupted by Hurricane Ivan. The U.S. Energy Department is set to approve the loans once the details are worked out with the refineries, a congressional source briefed on the pending decision told Reuters. The oil would be loaned from the 670-million-barrel Strategic Petroleum Reserve (SPR) to two refineries for two to three weeks, said the source. "I have authorized 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.
Abraham did not say how oil would be loaned or which refineries are seeking the crude. Results of the negotiations will be announced "in the near future," the department said. A separate government source told Reuters that one of the loans would be for 100,000 to 200,000 barrels, and the other for 1 million to 2 million barrels. U.S. oil prices briefly soared to $49 a barrel on Thursday at the New York Mercantile Exchange as traders said loans of that size would not be enough to replenish inventories. The November futures contract settled at $48.46 a barrel.
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