IEA says no request for further oil release

The United States and other industrialised nations have not requested a second release of emergency oil supplies, the head of the International Energy Agency said on Thursday, hours before a decision is due to be made.

business Updated: Jul 21, 2011 20:17 IST

The United States and other industrialised nations have not requested a second release of emergency oil supplies, the head of the International Energy Agency said on Thursday, hours before a decision is due to be made.

IEA members agreed to release 60 million barrels in emergency stockpiles last month, only the third release in the agency's history, as concern grew in consumer countries that high oil prices were hurting a fragile global economy.

Oil prices fell after the release but have since moved higher, raising the possibility the IEA would boost world supplies of oil once again.

"No country asked me to release additional barrels," the IEA's executive director, Nobuo Tanaka, told Reuters in an interview. "We will decide probably in a matter of hours."

A decision to release stocks has to be backed by a unanimous decision of the IEA's 28 members, who include the United States, Germany, France, Britain and Japan.

Oil prices fell more than 10% in the days after the IEA shocked world markets by announcing the emergency release of supplies on June 23.

The day before that decision Brent crude was trading around $114 a barrel. On Thursday it was changing hands at $117.58.

Tanaka said oil market fundamentals were tightening despite the release of the stockpiles, which he said were moving to market at the rate of about 600,000 barrels per day (bpd).

"We have to monitor the situation very carefully," Tanaka said. "We know the market has been tightening as we had predicted."

The agency would be flexible and would be ready to act and release more oil if necessary, Tanaka said. IEA members hold more than 4 billion barrels of oil in stock, of which nearly 1.6 billion barrels are held for emergency purposes only.

The IEA said in June the release of reserves would cover the gap in supply resulting from the conflict in OPEC-member Libya. The IEA had planned to release the stocks at a rate of around 2 million barrels per day (bpd).

Tanaka though said that since around 600,000 bpd was reaching markets, the drawdown would probably continue in August.

The IEA estimated demand for OPEC crude in the third quarter would exceed the producer group's June supply by 1.3 million bpd. So IEA strategic reserves would fill about half the gap through August.

Critics of the June decision said at the time the move could aggravate consumer relations with OPEC, which produces around 29 million bpd, or about a third of global needs.

US Republicans said the release of stocks was an ill-timed misuse of emergency supplies when oil prices were already 20% below their peak.

Tanaka defended the IEA decision. He suggested the action had alleviated price pressures on light crude, similar to the type of oil produced by Libya, because its price differentials had come down compared with heavier crude.

"Downstream refining margins are definitely improving," he said. "So we think we are successfully impacting the market by the release. We could say that prices could have been higher, much higher, if we hadn't made any strategic release of stocks."

Saudi Arabia
The release of emergency stocks in June coincided with policymaker concerns that high oil prices would choke off the world's fragile recovery from the global financial crisis.

US President Barack Obama was under pressure domestically as retail gasoline prices climbed to $4 a gallon. OPEC refused to increase supplies to assuage consumer concerns at a meeting in June.

Having failed to convince fellow members of the producer group of the need for more supplies, Saudi Arabia, OPEC's biggest producer by far, increased its exports unilaterally.

Tanaka said the kingdom was expected to increase its output to as much as 10 million barrels per day in July. That would be around 200,000 bpd higher than June's output, he said.

A Reuters survey of OPEC output estimated Saudi Arabia's output in June at 9.4 million bpd and OPEC's total production at 29.45 million bpd.

Before June, the last emergency release of supplies by the IEA was in 2005 when Hurricane Katrina devastated oil infrastructure in the US Gulf of Mexico.

The only other release in the 37-year history of the IEA was at the time of the first Gulf War.

Sources had said that Germany and Italy were expected to oppose any further IEA emergency oil reserve release because they were not much in favour of the decision in June.

The agency, part of the Paris-based OECD, was formed in response to the 1973/74 oil crisis and promotes energy diversity and efficiency.

First Published: Jul 21, 2011 20:15 IST