Oil prices in Asia fall on American stock release plan

Oil prices in Asia fall on American stock release plan

SINGAPORE (Reuters): Crude oil prices fell on Monday dampened
by news that the United States was looking to release oil from
its national stockpile.

News that Iraq's output had dropped as much as 800,000 barrels
per day (bpd) did little to shake the bearish mode on the day.
March New York Mercantile Exchange (NYMEX) crude futures were
last traded at US$27.00 per barrel by 0910 GMT, down 22 cents
from New York.

A U.S. Department of Energy official outlined on Sunday a plan
to put millions of barrels of crude oil from the country's
Strategic Petroleum Reserve (SPR) on the market through an oil
swap with energy companies.

Under the plan, oil firms would receive oil from the reserve
and replace it at a later date.

The plan was being reviewed by the White House and a decision
on the proposal could be made in two weeks.

The official said a maximum four million bpd could be
withdrawn from the reserve each day.

If the policy is adopted it could have a significant impact on
the U.S. market.

The maximum release from the reserve would be about 20 percent
of the U.S.' daily oil consumption of some 19.8 million bpd.

The injection of oil would ease the supply tightness which two
weeks ago pushed NYMEX crude prices to $29.95 --the highest level
in nine years.

The bearish reaction to the potential release of U.S. stocks
was only partly offset by news of export problems in Iraq.

Taha Hmoud, the undersecretary of the oil ministry, said on
Monday that crude exports had dropped to as little as 1.5 million
bpd, well below the 2.3 million bpd seen in recent weeks.

He blamed the decline on a lack of spare parts and bad
weather. The latter has kept the Mina al-Bakr port, used for
exports to Asia, closed for four days, he said.

He said that Iraq would observe a ceiling on sales of $5.26
billion despite the fact that the United Nations had effectively
removed the limit on sales.

The news continued a spell of mixed signals for the oil market
on price direction.

OPEC

OPEC is due to review its policy of supply restraint at a
meeting in Vienna starting March 27.

But in the past two weeks it has offered mixed signals on what
could happen.

Last week, Mexican Oil Minister Luis Tellez told a conference
in Davos, Switzerland that producers would make efforts to ensure
that oil supplies were not tight.

But a senior OPEC source countered that, saying key producers
were inclined to keep production cuts in place when the accord
expires.

Venezuelan oil minister Ali Rodriguez said at the weekend that
OPEC could decide to increase oil output if forecast demand
materialized in the second half of the year.

OPEC and some non OPEC producers have aimed during the past
year to reduce supplies by five million barrels per day.

Relatively tight adherence by OPEC to the agreement has helped
draw down world stockpiles to their lowest levels in a decade.

But analysts have warned that an extension of the curbs would
lead to a severe supply shortage in the first half of the year.