The outbreak of war in the Persian Gulf is prompting President Bush to tap the nation's Strategic Petroleum Reserve for the next 30 days in an effort to keep oil markets under control.
Bush ordered the Energy Department on Wednesday night to put 1.12 million barrels a day on the oil market, or 33 million barrels during the sale period, from the 590 million- barrel stockpile.It is the first time the stockpile has been drawn on for other than tests.
An administration official, speaking on condition of anonymity, said Energy Secretary James D. Watkins would make the supplies available beginning Thursday.
The government probably would offer the entire first month's allotment for sale all at once, the official said, and the authorization for pumping can be renewed after the 30-day period if the war isn't over.
Bush said in a statement he was acting in concert with U.S. allies "to promote stability in world markets" in light of the war in the Middle East.
Buoyed by initial reports of a successful offensive against Iraq, oil prices dropped and London Stock Exchange prices rose Thursday following the lead of the Tokyo market which soared 1,000 points.
Gold and the dollar, both seen as safe havens during a war, fell because the U.S.-led allied attack to recapture Kuwait from Iraqi President Saddam Hussein appeared to be progressing more quickly and better than expected and a short war was hoped for, analysts said.
Oil prices plummeted Thursday on the London International Petroleum Exchange as reports from the Persian Gulf raised hopes of a swift resolution to the war against Iraq without damaging key Saudi oilfields, analysts said.
Brent crude, the widely traded North Sea crude oil, fetched $23.50 a barrel for March futures, down $6.10 a barrel on March futures from the previous close, and $22.50 for April futures.
Other analysts said Bush's announcement that oil would be released from the government's Strategic Petroleum Reserve helped move oil prices down on the London market. Officials said 33.75 million barrels would be put on sale immediately from the reserve.
Prices opened sharply higher Thursday in active trading of New York Stock Exchange issues as the stock-index futures market surged on the opening following a minute of silence to observe the start of war in the Persian Gulf.
The Dow Jones industrial average, which rose 18.32 Wednesday, was up 51.98 to 2560.89 shortly after the market opened, triggering the exchange's curb on program buying when the Dow jumps more than 50 points.
NYSE executives, including Chairman William Donaldson, rang the opening bell and traders stopped to bow their heads.
When the minute was up, the bell rang again and a roar went up from the floor as traders clapped their hands and cheered.