IEA to release oil stocks to offset Libyan disruption

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, June 23 -- International Energy Agency Executive Director Nobuo Tanaka, making good on earlier threats, said the 28 IEA member countries have agreed to release 60 million bbl of oil in the coming month in response to the ongoing disruption of oil supplies from Libya.

“Today, for the third time in the history of the International Energy Agency, our member countries have decided to release stocks,” Tanaka said, adding, “I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy.”

IEA member countries have agreed to make 2 million b/d of oil available from their emergency stocks over an initial period of 30 days. IEA said it had been in “close consultation with major producing countries, as well as with key non-IEA importing countries” ahead of making this decision.

IEA expected that North America would release half of the total, with European countries releasing some 30%, and Asian countries, the remainder. IEA said it will produce a tally “once it has a clear indication of the types of oil that each country will make available.”

Release follows earlier threat
IEA’s decision to release oil follows a veiled threat to release stored supplies made prior to the June 8 meeting of the Organization of the Petroleum Exporting Countries in Vienna.

The IEA governors, in an effort to exert pressure on producers, said they were “prepared to consider using all tools that are at the disposal of IEA member countries”—a reference to the fact that IEA members hold 1.6 billion bbl of oil in strategic reserves, which could be released to stabilize the market (OGJ Online, May 20, 2011).

In announcing its decision this week, IEA said the disruption of supplies from Libya has been under way for some time and its effect has become more pronounced as it has continued. The agency said the disruption would be compounded by seasonal high demand going into the summer months.

“The normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further,” IEA said, adding that, “Greater tightness in the oil market threatens to undermine the fragile global economic recovery.”

IEA said the unrest in Libya had removed 132 million bbl of light, sweet crude oil from the market by the end of May, and that commercial stocks in the OECD countries had tightened as a result.

“Because crude demand peaks during the summer season in the Northern Hemisphere, we estimate that preventing further market tightening in the third quarter will require 2 million b/d of additional supply,” IEA said.

IEA also noted that analysts generally agree “that Libyan supplies will largely remain off the market for the rest of 2011.”

IEA’s statement follows a report by Goldman Sachs, as well as IEA itself, that Libya’s oil production faces a long haul to make a full recovery in the wake of the civil war gripping the country and will not return to its full capacity until 2015 (OGJ Online, June 23, 2011).

“Given this loss and the seasonal increase in demand, the IEA warmly welcomes the announced intentions to increase production by major oil producing countries,” IEA said, referring to the decision by Saudi Arabia earlier this month to unilaterally boost its output to 10 million b/d (OGJ, June 20, 2011).

“The IEA welcomes the announcement made by Saudi Arabia that it intends to make incremental oil available to the market,” the group said. It added that IEA and its member countries have been in close contact with key oil producing countries, and in particularly with Saudi Arabia, which holds “the lion’s share” of OPEC’s spare capacity.

Production boosts to ‘take time’
However, IEA took its decision to release the additional supplies because promised production boosts “will inevitably take time” and that the threat of a serious market tightening, particularly for some grades of oil, “poses an immediate requirement” for additional oil or products to be made available to the market.

IEA said the collective action of its members is intended to “complement expected increases in output by these producing countries, to help bridge the gap until sufficient additional oil from them reaches global markets.”

IEA said its governing board will within 30 days of this notice “reassess the oil market, review the impact of their coordinated action and decide on possible future steps.”

IEA’s decision came at the beginning of the weekend in most of the OPEC countries, and responses from member states were muted. OPEC delegates from Iran and two gulf states told Reuters that the release was unjustified.

"The oil price hasn't shot up to $150[/bbl]. There is no reason to do this. The market is not short of supply. Kuwait and Saudi Arabia have been raising production, but there have not been many buyers. The IEA is just playing politics with the US," one gulf delegate said.

"I don't know how to justify this interference in the market," said one OPEC delegate on condition of anonymity.

Earlier this month, Iran’s OPEC governor Mohammad Ali Khatibi told Iranian media that the member countries that supported an output increase at the June 8 meeting amounted to an effort to “interfere” with market forces under US pressure.

"There is currently absolutely no shortage in the market, and consequently there is no need to raise production," said Khatibi. "Raising supply in the absence of demand would amount to an interference in the market flow (OGJ Online, June 20, 2011).”

Contact Eric Watkins at hippalus@yahoo.com.

Related Articles

Deloitte studies oil supply growth for 2015-16

02/04/2015 A Deloitte MarketPoint analysis suggested large-field projects, each producing more than 25,000 b/d, could bring on 1.835 million b/d in oil supply...

BG’s 2015 budget ‘significantly lower than 2014’

02/03/2015 BG Group plans capital expenditures on a cash basis of $6-7 billion in 2015, a range it says is “significantly lower than 2014” due to “a lower oil...

BP trims capital budget by $4-6 billion

02/03/2015 BP PLC plans an organic capital expenditure of $20 billion in 2015, down from the previous guidance $24-26 billion. Total organic capital expenditu...

IHS sees second-half end of US output surge

02/03/2015

Expectations are moderating about growth of oil production in the US this year.

Gazprom Neft starts shale oil production in western Siberian field

02/03/2015 JSC Gazprom Neft reported start of shale oil production from the Bazhenov formation during tests of two wells in southern Priobskoye field in centr...

Anadarko reports 2014 loss, remains upbeat about Wattenberg

02/03/2015 Anadarko Petroleum Corp. announced a 2014 net loss of $1.75 billion, or $3.47/share diluted, including a net loss of $4.05 billion associated with ...

CNOOC cuts capital budget, starts production from Jinzhou 9-3

02/03/2015 CNOOC Ltd. is slashing its capital budget for 2015 by 26-35% to $11.25-12.86 billion compared with last year’s budget. Capital expenditures for exp...

MARKET WATCH: NYMEX crude oil stays positive on lower rig count

02/03/2015 Oil prices on the New York and London markets closed higher Feb. 2 on positive momentum generated by a falling US rig count, suggesting cuts in pro...

Obama’s proposed fiscal 2016 budget recycles oil tax increases

02/02/2015 US President Barack Obama has proposed his federal budget for fiscal 2016 that he said was designed to help a beleaguered middle class take advanta...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected