The price of crude oil rose to a record high yesterday even as the Bush administration agreed to tap the nation's emergency oil stockpile because of supply problems caused by Hurricane Ivan.
Prices rose because of concern about damage to oil operations in the Gulf of Mexico by last week's hurricane, analysts said. Imports were delayed and production has not returned to normal, causing some refineries to run low on supplies.
Markets have been jittery in part because of concerns about attacks on oil operations in Iraq.
(Hadi Mizban -- AP)
The Energy Department announced yesterday that it would lend 1.4 million barrels of oil from the Strategic Petroleum Reserve to a unit of the Royal Dutch/Shell Group and 300,000 barrels to Placid Refining Co. of Port Allen, La.
Officials said the oil would be returned with supplemental supplies that would be provided as interest. Jeanne Lopatto, an Energy Department spokeswoman, declined to say how much additional oil the companies would have to provide, describing the information as proprietary.
The Energy Department is continuing to accept requests for oil. Officials said a request from ConocoPhillips is pending.
Yesterday's announcement did little to allay the concerns of oil traders. Markets have been jittery because of concerns that world oil production is close to capacity at a time of instability in Iraq and attacks on oil operations elsewhere.
U.S. benchmark crude oil for November delivery closed at $48.88 a barrel yesterday, up 42 cents from the day before. The previous closing record was $48.70, set on Aug. 19. Adjusted for inflation, prices remain below their 1981 peak.
Marshall Steeves, an analyst for Refco LLC in New York, said he was surprised that the announcement about the loan from the petroleum reserve did not bring down prices. The administration first said on Thursday that it was considering lending oil.
He said the market reacted to a report from the Minerals Management Service showing that oil production in the gulf remained nearly 28 percent below normal, at about 1.2 million barrels per day. "People were thinking that it would come back a lot more quickly than it has," Steeves said.
Reports last week also showed a significant decline in U.S. crude oil reserves as a result of the storm.