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

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

Shell makes FID on Appomattox deepwater development in Gulf of Mexico

07/01/2015 Royal Dutch Shell PLC has taken a final investment decision (FID) on the Appomattox deepwater development, authorizing construction and installatio...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...
White Papers

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

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
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

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