Oil release a stop gap solution says IEA
London, June 28, 2011
The IEA's release of oil stocks was a temporary measure to fill a supply gap before extra Saudi Arabian production emerged, its executive director said on Tuesday.
"We are simply saying we will just fill the gap before Opec or Saudi is going to produce supplies for the market," Nobuo Tanaka told reporters. "We are just filing the gap -- we can't continue for ever."
Last week's release of oil from strategic stocks in the West, coordinated by the International Energy Agency, has sparked a sharp response from Opec, still smarting after its June meeting which ended in disarray.
Tanaka said he was in regular contact with leading Opec producer Saudi Arabia, which pledged more of its own oil after the Organization of the Petroleum Exporting Countries failed to agree as a group to raise supply.
Opec Secretary-General Abdullah Al-Badri has called for an immediate halt to the IEA oil release, saying on Monday that he saw no reason for it. That was echoed by Opec president Iran.
Its Opec governor Mohammad Khatibi told an official website on Tuesday that the oil market was balanced and there no need for Opec to call an emergency meeting to reassess supply.
"There are absolutely no concerns in regard to the supply of oil by this organisation," Khatibi said.
The IEA, however, had decided to act ahead of expected tightness, Tanaka said. Its previous two interventions were a reaction to Huricane Katrina in 2005 and a 1991 release due to the Gulf War.
"It's a pre-emptive use, in that way this is a new mechanism," Tanaka said. "We decided pre-emptively to move towards seeking a soft landing for the global energy market."
"We are mandated that we can act of course when there is disruption, but also the serious threat of disruption," he said. "Clearly the serious threat is there."
Tanaka said he was confident Saudi Arabia would produce more, as it had pledged, but it might take "a couple of weeks" to reach the market.
"We think Saudi Arabia has about 3 million barrels per day" of spare output capacity, he said.
The IEA was reacting to the loss of Libyan oil exports but the shortage had not been immediately felt because many European refineries had been closed for regular maintenance work in the early weeks of the conflict, reducing demand.
"This disruption from Libya did not come up to the surface, but now we are very sure this tightening of the market will happen in July, August when refinery maintenance is over," Tanaka said.
He reiterated that the current stocks release was for 30 days after which the agency would reassess the market. -Reuters