* UK set to agree to US proposal to tap emergency stocks-UK
* Formal request expected soon from Washington - UK sources
* Timing, size of eventual release undecided
* White House spokesman denies "agreement" to tap strategic
(Adds detail, comments from UK Prime Minister, prices)
By Joshua Schneyer
NEW YORK, March 15 Crude prices fell by $2
a barrel on Thursday after Reuters reported that the
United States and Britain were preparing a release from
strategic oil reserves this year.
Two UK sources told Reuters that Britain has agreed to
cooperate with the United States in releasing reserves, but
volumes and exact timelines have not yet been determined.
Britain expects to receive a formal request from U.S.
officials "shortly," the UK sources said, and releases would
seek to boost supplies by summertime. U.S. White House spokesman
Jay Carney said there has been no agreement made to tap
Oil prices pared sharp initial losses of more than $3 after
the report, with benchmark Brent for May delivery
settling down $1.98 at $122.60 a barrel. Brent for April
delivery, which expired on Thursday, fell $1.42 a barrel to
$123.55. U.S. crude futures fell 32 cents to $105.11 per
Oil traders said they were waiting for more details on any
release from emergency reserves.
"It all depends on how much they are going to release," said
analyst Chris Dillman at Tradition Energy in Connecticut.
Potential releases were discussed at a meeting on Wednesday
in Washington between President Barack Obama and Prime Minister
David Cameron, Reuters reported early Thursday.
Cameron later told reporters that releasing oil reserves is
"worth looking at," but said no decision has been made.
Tapping emergency reserves could help to stem surging fuel
prices and gird against any potential supply shortfall from
The use of strategic reserves by consumer nations would
follow last summer's concerted 60-million-barrel release by the
28-member International Energy Agency (IEA) countries, in a bid
to fill the supply gap caused by Libya's civil war, which
slashed exports from the country.
The Paris-based IEA said last month it saw no reason to
resort to SPR releases in the near future. Last year's move was
unanimously agreed among IEA members, but countries including
Germany and Italy have voiced reluctance to tap reserves again.
"We saw an initial sharp drop and collapse but prices seem
to have recovered," said analyst Carsten Fritsch at Commerzbank.
"For the moment it's the U.S. and UK alone; no other country
seems willing to join so the market wonders if the impact of
this will be lasting."
The Obama administration could be tempted to tap the
727-million-barrel U.S. SPR as retail gasoline prices have
surged to their highest level ever for mid-March, near $3.80 a
gallon, drawing consumer ire during a presidential election
"We'd both like to see global oil prices at a lower level
than they are," Cameron told students and reporters at New York
But SPR use would surely draw criticism from those who feel
there is no major supply disruption underway to warrant it.
"The government is playing retail politics with energy and
not solving the underlying problem. It does more damage than
good," said John Hoffmeister, former president of Shell Oil,
speaking on CNBC.
U.S. officials have been weighing policy measures to keep
high fuel prices from derailing economic growth.
The U.S. economy, the world's biggest, is bouncing back from
a prolonged slowdown, but surging pump prices could derail the
recovery and annoy U.S. motorists, who consume around a third of
world gasoline supplies.
SUPPORTIVE U.S. ECONOMIC DATA
U.S. economic data on Thursday was supportive for oil prices
and added to a recent spate of good news about the pace of
U.S. initial jobless benefits claims fell to a four-year low
The New York Federal Reserve said its Empire State general
business conditions index rose to its highest since June 2010 in
The Philadelphia Federal Reserve Bank's business activity
index showed manufacturing also continued to grow in the region.
(Additional reporting by Gene Ramos, Robert Gibbons and Matt
Falloon in New York, and Drzen Jorgic in London.; Editing by
Dale Hudson and Bob Burgdorfer)