UK confirms receipt of EU warning on oil stocks cover

Apr 27, 2005 02:00 AM

A spokesman for the UK's Department of Trade and Industry said that the country had broken European Union regulations requiring 67.5 days of reserve oil, but had rectified the situation.
Late last year, the DTI received a letter from the European Union's Commission for Energy warning that the country had dipped below reserve levels. Each country in the EU has to maintain 90 days of oil on hand in case of an emergency, but as an oil producer the UK is required to keep less.

Nevertheless, high oil prices and high storage costs led large oil refiners and producers in the UK to sell oil, the DTI spokesman said. The DTI is now reorganizing its entire system for keeping oil stocks, the spokesman said.
"We have been in compliance (with EU regulations on oil reserve levels) for several months now," he said. "But we are also changing the entire system around to prevent buffer stocks from running down."

The UK doesn't keep oil reserves itself, but requires large companies such as Shell and BP to maintain a certain amount in reserve and report their stocks every month. That information is then passed on to the European Union as well as the International Energy Agency, which is also in charge of monitoring oil stock levels.
However, increasing storage costs as well as decreasing reserves in North Sea oil reserves have taken their toll on UK oil companies. High oil prices have also improved incentives for companies to sell their oil rather than keep it in reserve.

The DTI has now increased the obligation to keep more oil aside of some of the UK's refiners and direct importers. It has also modified its policy on the monitoring of stocks. The DTI now focuses how much oil is sold from the storage sites as opposed to how much oil is transported to these sites.
By monitoring stocks this way, the government can keep better watch over how much oil is actually in storage, the spokesman said.

Source: Dow Jones
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