WASHINGTON/NEW YORK The United States will loan 1 million barrels of crude from emergency reserves to Marathon Petroleum Corp after one of its refineries slowed output in the wake of Hurricane Isaac, the Department of Energy said on Friday.
The Obama administration has been considering plans to tap a larger amount of crude from the 727 million barrel Strategic Petroleum Reserve as tension over Iran's nuclear program and Western sanctions on Tehran have boosted oil prices.
The White House is in the data-gathering process and would not likely make a decision on a larger tapping of the reserves until early September, sources have said.
Friday's decision by the DOE was much narrower than a large drawdown, which typically involves talks with oil consumer and producer countries. Energy Secretary Steven Chu has the power to loan small amounts of oil from the reserve following storms and other events that reduce petroleum supplies.
"This emergency loan from the Strategic Petroleum Reserve will help ensure Marathon's refining operations have the crude oil they need to continue operating," Chu said in a statement.
The DOE said it continues to "keep all options on the table to address additional or sustained oil supply issues."
An analyst said the loan of sweet crude oil to Marathon should not have a big impact on markets.
"This is a small, limited time swap in response to Isaac and should not have a major impact on crude prices, although, as DOE noted, it is keeping the option of a larger release on the table for future or sustained disruptions," said Bob McNally, head of the Washington-based consulting firm the Rapidan Group.
Oil futures in New York rose about $1.50 after the loan announcement, to more than $96 per barrel.
The DOE has not received additional requests from other refiners along the U.S. Gulf Coast for oil loans, a source familiar with the talks said. If the agency gets more requests, it "will move expeditiously to review them" to ensure it is responding as quickly as possible to those hit by the storm, the source said.
Marathon said its 490,000 barrels per day refinery in Garyville, Louisiana, was running at reduced rates due to heavy rain but that it had not sustained significant damage.
Under the loan agreement, Marathon will return an equal amount of similar oil to the reserve within three months, plus additional barrels representing interest, the DOE said. The SPR will be ready to begin delivering oil to Marathon on Friday.
Exxon Mobil, Valero and Royal Dutch Shell also have refineries that were either still shut or were at reduced rates due to the storm.
Valero spokesman Bill Day said his company had not asked for oil from the reserve but it would continue to evaluate its needs. Both of its Louisiana refineries remained shut.
Isaac made landfall this week as a Category 1 hurricane but has since moved inland and weakened to a tropical depression.
BIG DRAWDOWN LAST YEAR
The Obama administration agreed to tap 30 million barrels of oil last year - less than two days of U.S. demand - as civil war in Libya took out about 1 million bpd of crude from the country. The drawdown was part of a wider sale of 60 million barrels coordinated with the International Energy Agency.
This year sanctions have reduced Iran's oil output the same rate as last year's Libyan crisis, spurring calls from Congress to push the White House to release oil. Countries in the West believe Iran is attempting to develop nuclear arms, while Tehran says its nuclear program is for energy and medical purposes.
Maria van der Hoeven, the IEA's chief, said in Norway this week she opposed a coordinated drawdown, citing adequate global supplies. Sanctions on Iran, "didn't come out of the blue," she added.
(Additional reporting by Kristen Hays in Houston; Editing by Gerald E. McCormick, Leslie Gevirtz, Tim Dobbyn, Phil Berlowitz and M.D. Golan)