The recent round of warm talks between U.S. and U.K. heads of government has yielded a huge political bonus for U.S. President Barack Obama, as the two leaders are set to announce a cooperative plan to released strategic oil stocks, something that is likely to help bring down the sky-high price of crude.
High oil prices, and the resulting spike in retail gasoline cost to consumers have become a major issue in the U.S., where they are seen as hurting the president's re-election prospects.
Citing an anonymous White House source, Reuters is reporting a formal request by the U.S. asking the U.K. to release some of its strategic crudes reserves is expected shortly. Britain would then officially accede to the request. The action would follow several days of friendly diplomatic banter between U.S.President Barack Obama and British Prime Minister David Cameron, who are said to have discussed the issue Wednesday. The two world leaders also hosted a cordial White House dinner and attended several college basketball tournament games in the past week.
We regularly consult with the British on energy issues and any discussion that we had was in that context, an Obama administration official said told Reuters.
The action follows an earlier request to an international body, the Paris-based International Energy Agency, to release oil from its own reserves. That organization had resisted pressures to coordinate such a release, noting current supply disruptions did not warrant the action, even if prices were elevated.
Another option, asking an oil producer to increase capacity and hence world oil supply, is also seen as being off the table. Saudia Arabia, the world's largest oil exporter and the only country in the world with any acknowledged production slack, has said it would increase capacity only to respond to demand shocks, rather than due to pricing issues.
West Texas Intermediate Light Sweet Crude, the benchmark U.S. petroleum derivative, dropped sharply on the news, to under $104 per barrel on the most-actively traded contract, for April delivery. It recovered to $105.18 by lunch-time trading non the New York Mercantile Exchange, down 25 cents for the day. The same contract had traded at levels higher than $110 at the beginning of the month.