The Energy Department announced on Friday that it would stop sending oil to the U.S. Strategic Petroleum Reserve (SPR), three days after Congress overwhelmingly passed a bill that would temporarily halt such shipments. Specifically, the Energy Department said that it would not sign contracts this year to receive and transport up to 13 million barrels of crude to the reserve sites, which the Bush administration had increased by 30% since 2001. On Tuesday, the White House confirmed that it would not veto the new legislation. Currently, the SPR contains 702.7 million barrels. Under the 2005 Energy Act, Bush had intended to top out that tank at one billion barrels.

Last Friday, President Bush visited Saudi Arabia (after stopping in Israel), in an attempt to coax that oil-rich nation to increase its crude oil production. The last time President Bush met with King Abdullah, back in mid-January, he received a chilly response. This time, however, the Senate Democrats also introduced a resolution that would block $1.4 billion in arms sales to Saudi Arabia unless Riyadh agrees to increase its oil production by one million barrels per day. The Democrats said they introduced this measure to coincide with President Bush's trip in order to put pressure on Saudi Arabia to pump more oil soon, to reduce the cost of gas for Americans.

Ironically, Saudi Arabia had already been exceeding its Organization of Petroleum Exporting Countries (OPEC) quotas for the past six months. For instance, on Thursday OPEC said Saudi Arabia produced nine million barrels a day in April, down slightly from March, but still 100,000 barrels per day over its quota of 8.9 million barrels a day. After President Bush's visit, Saudi Arabia pledged to increase its crude oil production another 300,000 extra barrels per day above current levels. Ali Naimi, Saudi Arabia's oil minister, said after meeting President Bush that the kingdom's crude oil output would hit 9.45 million barrels per day by June, just in time for peak summer driving season. It will be very interesting to see if crude oil prices will finally stabilize.

Meanwhile, global steel prices have risen by over 40% since December and appear to be headed higher, especially since ArcelorMittal, the world's largest steel company, boosted its prices by 20% per metric ton in Europe, due to higher costs for iron ore and transportation. Contracted iron ore prices have already risen 71% this year. Two other crucial steelmaking ingredients, coking coal and scrap steel, have doubled in price. This surge in raw-materials prices is mostly due to tight supplies and soaring demand, fueled in part by the rapid industrialization of China, India and other developing nations - and the world's voracious appetite for steel shows little sign of easing.

Some nations are hoarding steel by erecting export barriers. For example, India recently imposed a 15% duty on exported steel. Some other countries, which do not make much steel, are slashing import taxes in an effort to attract more steel. For example, Iran announced last month that it was lowering its import tax on rebar steel, which is used in new buildings and roads, to 9% from 20%. This is one reason why I'm so bullish on shipping and steel stocks.