The White House announced late today that it will provide refiners a limited supply of crude oil from the Strategic Petroleum Reserve to make up for oil production lost to Hurricane Ivan. The announcement came after crude oil prices climbed for the sixth day in a row, dampening investors' enthusiasm for stocks.
As crude oil futures rose to $48.46 a barrel -- just 24 cents short of the all-time high -- the Dow Jones industrial average and the Standard & Poor's 500 stock index fell and the Nasdaq Stock Market composite index struggled just hard enough to avoid losses.
Investors also were discouraged today by the Index of Leading Economic Indicators, which fell for the third month in a row. Designed to forecast economic developments three to six months from now, the index dropped 0.3 percent.
In the chaotic crude oil futures market of the New York Mercantile Exchange, crude opened sharply lower after White House officials early in the day appeared to open the door to tapping the Strategic Reserve.
Until today the Bush administration has resisted calls -- from airlines, truckers and Democrats -- to tap the reserve in hope of holding down oil prices. Early in the day White House spokesman Scott McClellan repeated administration opposition to using the reserve to manage prices, but he said the reserve is for "national emergencies or natural disasters," which seemed to open the door to opening the reserve in response to supply upheavals caused by Hurricane Ivan.
After the markets closed, the Energy Department announced in a statement posted on its Web site that oil will be provided to unnamed refiners, who will be required to give back to the reserve a similar amount of crude, plus a bonus, once supply conditions are back to routine. The terms of the deal were still be negotiated this afternoon.
The statement said the release is similar to one done in 2002 after Hurricane Lili caused a disruption in oil supplies.
"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," Secretary Spencer Abraham said in the statement.
The hurricane blew away several oil production platforms in the Gulf of Mexico, cutting output so much that gulf coast refineries have been forced to reduce their operations.
That temporary disruption is adding more pressure to prices, which have been in a record range since early in the summer, because of strong demand around the world.
Once traders talked through the topic of tapping the reserve, crude futures rebounded, more than making up for the morning's decline and adding another 11 cents a barrel to the price of crude for delivery next month.
Oil company stocks have been some of the market's top performers this year, but now analysts are warning that the fat profits produced by record prices cannot last forever.
Today Deutsche Bank downgraded the stocks of Shell and Exxon-Mobil to hold. Exxon shares fell $1.10 to $47.76, a loss of more than 2 percent, which made the stock the biggest loser among the 30 Dow Jones industrials.
The Dow, which fell 136 points yesterday, dropped another 70 today, closing at 10,038.90. The S&P 500 fell 5 points to 1,108.36. The Nasdaq composite closed up less than a point at 1,886.43.