UPDATE - U.S. moves to boost oil supplies

biz.yahoo.com Tuesday March 4, 4:41 pm ET

WASHINGTON, March 4 (Reuters) - In a move to keep more oil in the U.S. market amid high crude prices, the Energy Department said on Tuesday it will allow oil companies to defer delivering 3.5 million barrels of crude supposed to be shipped to the Strategic Petroleum Reserve during April.

The department's decision will keep more oil in the market as U.S. crude inventories are low and oil prices remain high because of fears of a war with Iraq and a disruption in Venezuelan crude exports due to a workers strike.

Oil companies have until April 2004 to deliver the deferred crude, plus additional barrels as interested.

The emergency stockpile will still receive a shipment of 400,000 barrels of oil already scheduled for next month, a department spokesman said.

The crude bound for the reserve comes from oil companies that turn over the oil to the government as royalty payments for drilling on federal leases. Energy firms normally pay cash royalties on the crude they find.

The Bush administration has suspended about 18.5 million barrels in royalty-in-kind oil shipments since mid-December that were bound for the emergency reserve.

The stockpile was created by Congress in the mid 1970s after the Arab oil embargo and currently holds 599 million barrel of crude in a series of underground salt caverns at four sites in Texas and Louisiana.

The administration plans to fill the reserve to its capacity of 700 million barrels by the end of 2005.