Top executives from some of the world's biggest energy companies on Tuesday said global oil supply is plentiful in spite of Libyan supply disruptions, and urged U.S. policymakers not to tap strategic oil stockpiles.
At the high-profile CERAWeek energy conference in Houston, chief executives from French oil major Total SA, U.S.-based Hess Corp and Kuwait Petroleum Corp warned against a knee-jerk reaction to fighting in Libya, which has idled two-thirds of its 1.6 mln bpd oil output.
Fellow OPEC producers like Saudi Arabia "have the capacity to fill the gap, so sending the message that we need to use the strategic reserves in my opinion will … deliver the message that we are scared," said Total Chief Executive Christophe de Margerie.
Oil executives echoed assurances from OPEC officials that current supplies were sufficient to fill Libyan shortfalls.
"There is an exchange of views between different members of OPEC," Algeria's Oil and Energy Minister Youcef Yousfi told Reuters on the sidelines of the conference.
"Any shortfall can be mitigated in the short run," said Farouk Al-Zanki, chief executive of state-owned Kuwait Petroleum Corp.
The Obama administration is weighing requests by U.S. lawmakers to tap the 727 mln barrel Strategic Petroleum Reserve, or SPR, in a bid to tame U.S. crude oil futures that hit their highest level in 2-1/2 years this week.
The SPR, "should be left for the time when you are really confronted with a shortage of oil, which is not the case," Total's de Margerie said.
White House economist Austan Goolsbee said on Tuesday that tapping the U.S. emergency oil stockpile oil was one option the Obama administration has to respond to supply disruptions that sent world oil prices soaring.
Saudi Arabia, the world's largest oil exporter and home to most of OPEC's spare capacity, has boosted oil production to fill the gap left by Libyan exports and is now pumping about 9 mln bpd, almost 1 mln bpd above its OPEC quota.
OIL FALLS
Meanwhile, oil prices fell on Tuesday after Kuwait's oil minister said OPEC was considering the first official production boost in more than two years to ease anxiety about Libya's supply disruption and the potential for other disruptions in the region.
OPEC has not changed its official policy, though analysts have said the producer group's output has informally risen for months and Saudi Arabia has offered to help make up for Libya's shut output.
Brent crude futures for April delivery fell $1.94 at $113.10 a barrel, having fallen as low as $112.13. U.S. crude futures for April delivery fell 55 cents to $104.89 a barrel, after posting a low of $103.33.
Brent's premium to the U.S. benchmark West Texas Intermediate crude fell $1.44 to $8.34 a barrel, down from a peak of more than $17 last week.
"We are in consultations about a potential output increase," Kuwait's Sheikh Ahmad al-Abdullah al-Sabah told reporters. But he added that the group had taken no decision yet to produce above existing output targets.
Saudi oil minister Ali Al-Naimi said world oil markets were sufficiently supplied and the kingdom held 3.5 mln bpd of spare production capacity to meet any shortages.
Iran's OPEC governor downplayed the discussions and said there was no need for an output boost as consumer worries over supply were mostly "psychological."
Investment bank Goldman Sachs raised its oil price forecast and said it believed Saudi Arabia already had used up more of its surplus capacity than is widely thought.
U.S. crude prices will average $102 a barrel in 2011 because of the unrest in North Africa and the Middle East, the U.S. Energy Information Administration said, raising the forecast by $9 from its February outlook.
Libyan government forces attacked rebels with rockets, tanks and warplanes on western and eastern fronts, intensifying their offensive to crush the revolt against Muammar Gaddafi.
Witnesses reported at least four airstrikes by Muammar Gaddafi's forces on Ras Lanuf on Tuesday, fueling concerns the country's oil infrastructure could suffer long-term damage in the conflict.
