U.S. stocks up on low-price oil
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The U.S. is adding a record 150,000 barrels daily to its strategic reserve
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By CNN's Diana Muriel
LONDON, England (CNN) -- As concern over a possible war with Iraq mounts, the United States is building up its strategic petroleum reserve at a record rate.
The United States is adding around 150,000 barrels a day to the reserve, which has a capacity of 700 million barrels.
The country says it could draw up to 4 million barrels a day from the reserve -- more than a third of its daily oil imports -- in the event of a Middle East oil crisis.
But some analysts believe the United States is simply taking advantage of a good price to build up stocks.
"Ironically the U.S. is doing the right thing by filling that strategic reserve at lower prices," says Peter Gignoux of SSSB. "Traditionally they have come in and bought higher-priced oil."
But adding downward pressure to oil prices is news that OPEC members Algeria and Nigeria are pressing for an increase in the size of their production quotas.
Analysts say it's a sign of pressure on the cartel's unity and output discipline. OPEC has a production target of 21.7 million barrels a day. But that's proving tough to achieve.
"Up until this point, they have tried to maintain a discipline for that quota of 21.7 million. In point of fact, actual production has been up at around 23, 23.1," says Gignoux.
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Many market observers believe oil is overdue for a price correction
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"So if you have member states punching for individual quotas, that's an issue that OPEC is going to have to deal with, and I think it could be quite contentious."
OPEC is also fighting to keep non-members from overproducing and forcing the price of oil down further.
New OPEC chief Alvaro Silva Calderon is in Russia in a bid to persuade authorities there not to expand production with an export push.
All this is occurring against a backdrop of world economic stagnation. Global stock markets are in decline, and the prices of industrial commodities such as base metals have come under pressure.
But the oil price has risen from around $20 a barrel six months ago to over $25 today. Many in the markets believe it's overdue for a price correction.
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