U.S., Britain to agree emergency oil stocks release
A formal request from the United States to the UK to join forces in a release of oil from government-controlled reserves is expected "shortly" following a meeting on Wednesday in Washington between President Barack Obama and Prime Minister David Cameron, who discussed the issue, one source said.
Britain would respond positively, the two sources said.
"We regularly consult with the British on energy issues and any discussion that we had was in that context. We will continue to monitor the situation and consult with them and others," an Obama administration official said.
Rising world oil prices have pushed U.S. gasoline prices up sharply this year and threaten to choke economic recovery ahead of Obama's bid for re-election in November.
Brent crude has gained more than 15 percent since January, trading. It fell $2 on Thursday on news of the likely U.S.-UK release to just under $123 a barrel.
Details of the timing, volume and duration of the emergency drawdown have yet to be settled but a detailed agreement is expected by the summer, one of the sources said.
Other countries may also be approached by Washington to contribute, a further source said, Japan among them.
Previous emergency oil drawdowns, the latest last year, have been coordinated by the Paris-based International Energy Agency (IEA) to meet its mandate to cover substantial supply disruptions on the world oil market. Libyan oil production was closed for much of last year during civil war.
The IEA so far has declined to coordinate a broader release among its 28 industrialized members, saying that countries may legitimately decide to release oil unilaterally.
"The Obama administration can only take so much political pain from rising gasoline prices, which pose a serious threat to the economy and the president's re-election," said Bob McNally, a former White House energy adviser and head of U.S. energy consultancy Rapidan.
"SPR (Strategic Petroleum Reserve) use is more a matter of when than if. The administration strongly desires international support and coordination from other strategic stock holders, but is encountering stiff resistance from some IEA members who think strategic stocks should only be used for severe supply disruptions," McNally said.
Top U.S. officials including Energy Secretary Steven Chu and Treasury Secretary Timothy Geithner have said publicly in recent weeks that a U.S. oil release is among the options the government is considering.