Richardson

Monday January 24, 6:48 pm Eastern Time FOCUS-US energy chief to talk with key oil producers (new throughout)

By Tom Doggett

WASHINGTON, Jan 24 (Reuters) - U.S. Energy Secretary Bill Richardson will launch a series of meetings next week with key oil producing nations Venezuela, Mexico, Norway and Saudi Arabia amid a steep rise in world crude prices.

Richardson begins the energy diplomacy at a time when crude oil and heating oil prices have reached their highest levels since the Gulf War and the Clinton administration has been urged by some members of Congress to tap the nation's oil emergency oil stockpile to push down prices.

Chilly winter weather in the United States, depleted oil stocks worldwide, and talk from some OPEC members that the cartel might extend its production cuts have boosted oil prices to nine-year highs in recent days.

Crude oil futures at the New York Mercantile Exchange on Monday closed down 37 cents at $27.83 a barrel, while heating oil futures fell 7.15 cents to 86.35 cents a gallon.

Richardson told reporters he planned to meet with his counterpart from Mexico at the World Economic Forum in Davos, Switzerland on Sunday or Monday. He also will talk with Venezuelan oil minister Ali Rodriguez by telephone.

On Tuesday, Richardson will go to Oslo to meet with Norwegian oil minister Marit Arnstad.

Richardson said he would also travel to Riyadh to discuss the world oil situation with Saudi oil minister Ali al-Naimi. That trip will ``continue the dialogue'' between the U.S. and Saudi Arabia on several issues, including opening the Saudi energy sector to foreign investment, a U.S. Department of Energy (DOE) spokesman said.

The Saudi visit will take place at the end of February, and is the last leg of a planned visit to several Middle East oil countries. The trip also comes a month before the Organization of Petroleum Exporting Countries (OPEC) meets to decide whether to extend its oil output cuts.

OPEC member Venezuela on Monday shrugged off the spike in oil prices, saying demand and prices would ease in March.

``We in OPEC have agreed to work for the stability of the market and what is happening (with high prices) is a short-term phenomenon,'' Ali Rodriguez told reporters in Caracas.

POLITICAL PRESSURE TO EASE OIL PRICES

The Clinton Administration is keenly aware of the political sensitivity of higher oil prices. Northeastern lawmakers, whose constituents depend heavily on heating oil, are calling for the release of oil from the nation's Strategic Petroleum Reserve.

Sen. Charles Schumer, a New York Democrat, and Sen. Susan Collins, a Maine Republican, urged the Senate energy panel on Friday to quickly act on their proposed legislation that would give the Clinton Administration authority to sell oil from the emergency stockpile in order to lower prices.

The reserve was created by Congress in the 1970s following the Arab oil embargo and holds 567 million barrels of crude.

Congress returned to work on Monday after a two-month break. It remained unclear whether the Republican leadership or the White House would back bi-partisan legislation to sell stockpiled oil.

``Obviously we will take a look at it,'' said White House spokesman Joe Lockhart. ``As the law is written now you are not permitted to do that (sell reserve oil) for the sole purpose of trying to ... increase supply to reduce the price.''

The legislation would come into play when the price of U.S. crude oil remains above $25 a barrel for two weeks. It would require the president to explain what is causing the high price, and whether any oil should be sold from the stockpile.

Oil prices have settled over $25 a barrel every day since January 11 on the New York Mercantile Exchange.

SENATE ENERGY PANEL IN NO RUSH

Sen. Frank Murkowski, an Alaska Republican who heads the Senate Energy Committee, has no immediate plans to move the legislation through his committee, a congressional aide told Reuters.

Murkowski believes the oil reserve should only be tapped in case of a disruption in supplies, not to control prices, his aide said.

Also, neither Schumer nor Collins is a member of the energy committee.

Any sale of stockpiled oil would have only a fleeting effect on prices, according to some oil analysts.

``To bring down prices, you need to change expectations. And to change expectations you need a credible threat, and the only credible threat at this stage is OPEC increasing production,'' said Roger Diwan, a managing director at Petroleum Finance Co.

``And OPEC will increase production only if the Saudis want to increase production,'' he added.

-- Bill P (porterwn@one.net), January 24, 2000

Answers

If you are going to spin or lie, it would be nice to get your story straight first. Note the Venz Oil Minister says he will not speak to Richardson-US DOE:

>A HREF="http://pub3.ezboard.com/fdownstreamventurespetroleummarkets.show Message?topicID=308.topic">Can't get their story straight

Venezuela not worried by "speculative" oil spike ---------------------------------------------------------------------- ---------- http://www.marketwatch.newsalert.com/bin/story?StoryId=CoiVCub8ZtJi0nt mYody4&FQ=oil&Title=Headlines%20for%3A%20oil%0A

Reuters Story - January 24, 2000 14:52

CARACAS, Jan 24 (Reuters) - Venezuelan Energy and Mines Minister Ali Rodriguez said Monday he was not concerned by the latest spike in oil prices, which hit a nine-year high last week, saying it was speculative and would not last.

Predicting that oil demand and prices would subside seasonally in March, he reiterated the oil exporter's commitment to current export restrictions, which are due to last until March but may be extended.

"We in OPEC have agreed to work for the stability of the market and what is happening (with high prices) is a short-term phenomenon," he told reporters after a meeting in the Miraflores presidential palace.

"To a large extent it reflects the role of speculators," he added.

Rodriguez said he would not attend the World Economic Forum in Davos, Switzerland, where U.S. Secretary of State Bill Richardson had expected to discuss prices with him.

"We talk occasionally when necessary and no doubt we will talk in the next few days, but there is no meeting planned," he said of Richardson.

Richardson said Monday that he planned to be at the summit on Sunday and Monday next week to talk to Rodriguez and his Mexican counterpart Luis Tellez.

Consumer countries, of which the United States is the world's largest, have become increasingly concerned that OPEC's massive oil export cuts could take prices to dangerous levels if they are extended beyond their March expiry.

Several OPEC members, still suffering from the effects of the 1998 price crash, have indicated they intend to extend the agreement at least for the second and third quarters of this year, when demand falls seasonally.

Rodriguez said he did not expect the United States to sell oil from its massive Strategic Petroleum Reserve (SPR) to cool the latest rally "because they have sufficient documentation to know that prices will return to the level at which they were before this latest (spike) that we are facing."

Benchmark Brent crude oil prices have been rising steadily since March 1998, but they jumped a full $4 per barrel to $27 per barrel in the past two weeks after an OPEC committee recommended the cartel extend its current output beyond the March deadline.

OPEC will hold a ministerial conference in March to make a definitive policy.

-- Bill P (porterwn@one.net), January 24, 2000.

Bill,

Thank you, this is a very good post. What's your take on it?

Dee

-- Dee (T1Colt556@aol.com), January 24, 2000.

Bill

Thanks for the post.

I expecially liked the part where Richardson is going explore the possibility of "including opening the Saudi energy sector to foreign investment". Fat chance Richy. Now there is a great piece of disinformation.

-- PA Engineer (PA Engineer@longtimelurker.com), January 24, 2000.

Dee,

I think it points to a long haul to improve oil supply and that prices may go up further.

It appears that the oil producers are unwilling or unable to increase production. I think it substantiates that which can not be named (Y2K impacts).

It also seems that the Venezuelans and Saudis are getting miffed at being blamed for a shortfall when they know that the blamers know the real situation.

-- BillP (porterwn@one.net), January 24, 2000.

Bill,

Thank you for your comments. Good analysis.

-- Dee (T1Colt556@aol.com), January 24, 2000.

The reserve was created by Congress in the 1970s following the Arab oil embargo and holds 567 million barrels of crude.

I question this information. While the reserve was created in the '70s, it was largely (if not entirely) depleted in the following years. It was partially refilled last February/March with Mexican crude. Does anyone have any info on this?

-- Y2kObserver (Y2kObserver@nowhere.com), January 25, 2000.

Frank Murkowski - HE'S OUR MAN!!!!!

doan wanna sell unless it's a disruption. NOT to lower prices. YEAH!!!!!

-- night train (nighttr@in.lane), January 25, 2000.

Watch out for Murkowski -- he's the one responsible for that irritating notice nearly every spammer includes -- the one about being legal because it's in compliance with _proposed_ legislation. Yeah, it's the "Murkowski Bill". Pro-spam up the yinyan. It died, but the vomitus lingers on, in millions of pieces of spam that continue to pretend that a failed piece of proposed _bad_ law gives them the right to defecate into your computer.

So why shouldn't you trust a guy with a pro-spam track record?

Think about it.

-- Sluggo (sluggo@your.head), January 25, 2000.

Y2K Observer,

In reference to some questions, here is an article from "May 7, 1999".

[Fair Use: For Education and Research Purpose Only]

Department of Energy - News Release

http://home.doe.gov/news/releases99/maypr/pr99109.htm

May 7, 1999

Oil Flowing Into Strategic Petroleum Reserve For First Time in Five Years Richardson Witnesses Return of Oil Fill At Bayou Choctaw Site; Partnership with Department of Interior Bears Fruit U.S. Secretary of Energy Bill Richardson today visited the Strategic Petroleum Reserve's Bayou Choctaw crude oil storage facility, near Baton Rouge, La., to recognize the first flow of oil into the reserve in five years. He was accompanied by Reps. William Jefferson (D-La.) and Chris John (D-La.).

"In February, Secretary Babbit and I announced our plans to take royalty oil from federal offshore tracts in the Gulf of Mexico and use it to begin refilling the Strategic Petroleum Reserve," said Secretary Richardson. "Thanks to this joint effort the reserve is back on the right path, and our first line of defense in an energy emergency is getting stronger."

Two weeks ago, in the first phase of the federal royalty oil initiative, the Department of Energy took early delivery of 500,000 barrels of crude oil to be injected into the reserve at Bayou Choctaw. This week marks the beginning of the first sustained flow. An expanded, second phase will add as much as 100,000 barrels per day to the reserve.

The Strategic Petroleum Reserve is an emergency supply of crude oil stored in huge underground salt caverns along the coast of the Gulf of Mexico. With 561 million barrels in storage, the reserve is a national "insurance policy," the largest strategic stockpile of crude oil in the world.

The federal government expects to take a total of 28 million barrels of crude oil as payment of royalties due on oil produced from leases on the federally owned Outer Continental Shelf. The oil would be added to the reserve to replace oil sold from the stockpile in fiscal years 1996 and 1997 to reduce the deficit.

In the initial phase, agreements were reached with four of the largest crude oil producing companies in the Gulf of Mexico  Texaco, Shell, BP-Amoco and Exxon  to deliver approximately 3.9 million barrels of oil to the reserve over the next three months.

In the second phase, the initiative will expand to include most of the federal oil leases in the Gulf of Mexico. The Energy Department and Interior's Minerals Management Service will conduct a competitive exchange in which royalty oil produced at the offshore platform will be offered for crude oil that meets the reserve's specifications and can be delivered to any of four reserve sites. The four sites are at Bayou Choctaw and West Hackberry in Louisiana or Big Hill and Bryan Mound in Texas.

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-- Dee (T1Colt556@aol.com), January 25, 2000.