Oil: Prices fall as Bush takes aim at prices

NEW YORK - Oil prices fell on Tuesday after US President George W. Bush took aim at surging energy costs by suspending crude deliveries to the emergency reserve and by offering to ease stringent federal fuel standards.

US crude futures CLc1 fell 45 cents to US$72.88 a barrel, after sliding 2.5 per cent Monday from the US$75.35 record. London Brent crude LCOc1 was up 21 cents to US$73.21.

Bush outlined a strategy to bring down red hot energy prices that have threatened economic growth, calling on states to crack down on price gouging and on oil companies to reinvest record profits into domestic production.

He also offered some short-term fixes to high pump prices that are approaching a record over US$3 a gallon, giving US oil companies more time to pay back emergency loans of oil from the Strategic Petroleum Reserve.

"Our strategic reserve is sufficiently large enough to guard against any major supply disruption over the next few months," he said. "So by deferring deposits until the fall we'll leave a little more oil on the market." Critics of the move said it would likely have no effect on prices in the long term because it would only add a third of one per cent of daily US crude demand to the market.

Bush also directed the US Environmental Protection Agency to respond to requests for waivers that would allow suppliers to sell cheaper, lower grade petrol to ease a crunch that left some stations on the East Coast without fuel last week.

"By providing more flexibility in the types of petrol that can be used this summer, it should help ease concerns that there will be an ethanol supply crunch," said RBC Capital Markets in a research note.

Pennsylvania is the only state that has requested a petrol waiver from the federal government so far, but a decision has not yet been made whether to grant it, according to the EPA.

Petrol inventories in the United States have fallen for the past seven weeks, raising concern about supply during summer as motor fuel demand peaks. Some traders said oil could rebound if US petrol stocks fall for an eighth wee.

"The question is, is this a short-lived phenomenon?" said Nauman Barakat of Macquarie Inc in New York. "If you get another big draw in petrol tomorrow, this sell-off could be a one-day miracle." The US Energy Information Administration is scheduled to release its latest weekly inventory report Wednesday, with analysts predicting in a Reuters survey the report will show a 2.6 million barrel decline.

Also limiting losses, Exxon Mobil boosted security at its 420,000 barrels per day Qua Iboe oil export terminal in Nigeria on Tuesday due to the threat of attack by militants. Exports remained normal, the company said.

Oil prices had earlier been in positive territory after a report showing China's apparent demand for oil rose 6 per cent in March from a year earlier, the strongest increase since September.

- REUTERS