IEA won’t extend release of emergency oil supplies

Paris-based energy agency says doesn't plan second release of oil stockpiles
IEA won’t extend release of emergency oil supplies
Members of the IEA agreed to release 60 million barrels of oil in emergency stockpiles in June
By Reuters
Thu 21 Jul 2011 02:45 PM

The US and 27 allies said they don’t plan to extend the
release of emergency oil stockpiles announced through the International Energy
Agency last month.

The Paris-based agency said that while it prepared to
“augment” the sale of 60 million barrels first announced on June 23, this
intervention combined with higher output from the Organization of Petroleum
Exporting Countries will for now “substantially cover” the loss of exports
caused by an armed conflict in Libya. Brent futures in London were little
changed after today’s announcement, trading at about $118 a barrel.

“Supply and demand are pretty well covered as OPEC is
ramping up production and there are obvious risks to demand, so I don’t see any
need for the IEA to react,” said Oswald Clint, an analyst at Sanford C.
Bernstein & Co. in London. “It’s not a good thing for the IEA to get
involved like that generally as the market should be dictated by supply and
demand.”

OPEC will likely continue to boost production this month, by
as much as 200,000 barrels a day to about 30.23 million a day, according to the
agency. This follows a surge of 840,000 barrels a day in June.

The IEA “action served a market need by adding liquidity and
bridging the gap to additional supplies from OPEC countries,” the agency said
today in an e-mailed statement. “The IEA stands ready to augment the ‘Libya
Collective Action’ if market conditions again warrant,” it said.

The agency recommended that member governments allow
companies until the end of the year or later to replenish the inventories that
were released.

Nine out of 13 traders and analysts surveyed by Bloomberg
News this week said the agency probably wouldn’t extend the program because
Saudi Arabia is pumping crude at the fastest pace since 2006 and inventory
levels are above five-year averages in Organization for Economic Cooperation
and Development nations.

“The IEA has been sending signals all this week that a new
release at this time was unlikely, so this is a confirmation but not a
surprise,” said Olivier Jakob, managing director of Switzerland-based
researcher Petromatrix GmbH.

The initial IEA program had little effect on prices. While
Brent plunged 6.1 percent on June 23, futures subsequently recovered, trading
from $117 to $118 a barrel today, compared with $114.21 the day before the
intervention.

The June 23 action was the third time the IEA has
coordinated the use of emergency stockpiles since the agency was founded in
1974. The first was during the 1991 Persian Gulf War and the second when
Hurricane Katrina damaged oil rigs and refineries in the Gulf of Mexico in
2005.

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