Oil extends losses, stockpiles to open

“Literally and figuratively, I think we’ve weathered the storm, as the release of strategic reserves has calmed the market,” said David Thurtell, commodity strategist at the Commonwealth Bank of Australia.

Activity was limited as the more active New York Mercantile Exchange (NYMEX) was shut for the US Labor Day holiday.

US crude closed down $1.90 at $67.57 on Friday after news of a coordinated stockdraw drove prices further away from their record $70.85 a barrel high, touched last Tuesday.

The International Energy Agency (IEA) confirmed late on Friday that its 26 members would release 2 million barrels per day (bpd) of oil for 30 days to offset the impact of the killer storm, which knocked out a tenth of US refinery output and a quarter of its domestic crude production last week.

It is the first time since 1991 that the IEA has tapped its members’ 1.5 billion barrels in government oil stocks, created in the 1970s after the Arab oil embargo.

The US will auction off half the total in the form of crude oil from their Strategic Petroleum Reserve (SPR), while European and Asian countries may be able to supply more oil products such as gasoline, which are in very short supply.

Japan, whose massive state oil reserves are also entirely crude oil, said it would supply 240,000 bpd of the total, with the release set to be mostly oil products from private-sector inventories.

Extra fuel supplies will come as good news for the United States, which has been hit by sporadic shortages and soaring prices, prompting President Bush to urge Americans to go easy at the pump.

US gasoline demand accounts for more than a tenth of the world’s oil consumption. The US oil industry is still struggling to recover from Hurricane Katrina.