The US Department of Energy's decision on Wednesday to solicit additional
royalty-in-kind supplies to inject into the nation's Strategic Petroleum
Reserve next year will not "materially raise" oil prices, US Energy Secretary
Samuel Bodman told reporters Friday.

Bodman noted that US oil consumption totals between 21 million and 22
million b/d, and that expected injection rates into the SPR will average about
70,000 b/d, which would not appreciably affect oil prices.

However, a number of analysts have panned the DOE program, saying that
even small SPR builds in a tight market put increased upward pressure on
prices.

DOE on Wednesday said it will continue to fill the SPR in 2008 using
royalty-in-kind (RIK) oil from the Gulf of Mexico. The department issued a
solicitation seeking contracts to exchange up to 13 million barrels from Gulf
leases for oil that meets SPR specifications. Bids are due by November 6.

After over a year of suspending RIK fills, DOE resumed the program in
August, at average of 55,000 b/d, although some weekly totals were as high as
250,000 b/d.

Bodman also said that oil suppliers have "lost control" of the oil
market. Instead, prices are being "set in the trading rooms of New York,
London," Tokyo and other trading centers, he said.

Bodman said he was pleased with OPEC's decision to raise production by
500,00 b/d beginning in November, and he said he continues to encourage them
to make sure markets are well supplied.

The US energy official also said he is concerned about current oil prices
above $80/barrel, despite evidence of resiliance in the US economy.

"We've got a very strong economy, which numbers released this morning
indicated," he said. But Bodman cautioned that the US economy has not yet had
time to digest $80/b prices, and that it will take some time to determine the
effect of higher prices on economic growth.

--Cathy Landry, cathy_landry@platts.com