Industrialised nations agreed to release oil from emergency stockpiles for the third time in history, sending crude prices tumbling and providing some support to a faltering global economy.
The International Energy Agency (IEA) on Thursday announced a decision to release 60 million barrels over the next month, enough to boost world oil supply by 2.5%. The stock release is only the third in the 37-year history of the agency.
The agency said the action would fill shortages caused by the Libyan conflict and get oil quickly to market while Saudi Arabia makes good on its pledge to pump more oil. It will decide whether to release more oil in a month.
Some doubts emerged that the unexpected decision by the IEA would have a long-term impact. Japanese economics minister Kaoru Yosano said the IEA move was a warning to speculative buyers but Indian oil minister S Jaipal Reddy doubted the action would have an impact.
“Even if there is a slight increase in production (supply), those gains will not be made available to us because of unbridled speculation in the financial markets of the world,” he said.
The US also agreed to release 30 million barrels.
IEA Asian members Japan and Korea said that from next week they will start releasing oil reserves. Japan will cut the reserve requirement for oil companies by 7.9 million barrels over the next 30 days and South Korea will release 3.5 million barrels, together providing about 19% of the IEA target.
Australia and New Zealand, the remaining members from the Asia-Pacific region, are not participating.Mild Recovery after selloff
Oil’s deep sell-off paused on Friday as the impact of a surprise announcement of an emergency stocks release faded. Brent crude futures were 24 cents higher at $107.5, while US crude futures recovered 87 cents to $91.9.
Brent had fallen around 6% on Thursday after IEA announcement.
Analysts said physical oil could be offered at discounts piling further pressure on the international market. “Saudi Arabia will be crucial — will it stick to its promise to increase its output to 10 million barrels a day or not?” an analyst said.
Saudi Arabia, the world’s leading exporter, has yet to make any comment.