IEA: Iran outage, high price don’t justify oil release
IEA head says market has adjusted to lower Iran output; Says price alone does not justify oil release; Risks rift with U.S. over emergency release policy; U.S. does not wants rising oil price to offset Iran sanctions
August 28, 2012 6:42 by Reuters
The head of the International Energy Agency on Tuesday voiced her strongest opposition yet to a release of emergency oil stocks, risking a rift with the IEA’s most influential member, the United States, over strategic reserves policy.
Maria van der Hoeven, the Dutch executive director of the agency that represents 28 energy importing countries, said higher oil prices alone did not justify a release and world oil markets could cope with the loss of Iranian exports, hit hard by U.S. and European sanctions against Tehran.
“Higher prices alone are not the trigger for IEA collective stock release and at this moment we see that the crude oil market is adequately supplied,” she said in an interview with Reuters at an industry conference.
“We see that the loss of these Iranian barrels was long in the making, the market had time to adjust itself.”
Brent crude has bounced back above $110 in recent weeks after falling to $90 in June, putting pressure on the IEA from some members, particularly the United States, to tap into emergency oil stocks.
The prospect of strategic stockpiles being tapped resurfaced two weeks ago when Reuters reported that the White House was dusting off plans for fear that rising oil prices could undermine the effect of sanctions on Iran.
While the reduction of Iran’s exports by about one million barrels a day would be used to justify action, U.S. officials are also keen that rising prices do not diminish the impact of measures aimed at putting pressure on Iran to disable its nuclear weapons programme.
Van der Hoeven, however, stuck to supply-demand balances.
“The Iranian sanctions didn’t come out of the blue. The market has been adjusting relatively smoothly to lower Iranian supplies over the last nine months,” she said.
“On the supply side there is a steep increase in production from other OPEC sources, like Saudi Arabia, and we also see a steep ramp-up in the United States and the Canada oil sands.”
She said global fuel demand had been undermined by slowing economic growth.
Washington has support from Britain and France and could decide to move ahead on a release without the IEA’s blessing, but that would risk fracturing cooperation among member countries.
The IEA chief praised Saudi Arabia, the world’s top oil exporter, for ramping supply to near record rates above 10 million barrels per day when oil prices approached $125 a barrel earlier this year.
“Saudi Arabia did what they promised and they are doing it for a long time already. They are very reliable,” she said.
“It’s up to them to see if the market conditions ask for more supply.
“Everything has to be justified,” she said. “There could always be a reason to justify action but of course that’s not a collective one.”
Van der Hoeven said the U.S. would need to decide for itself whether Tropical Storm Isaac required a domestic U.S. oil release.
“It’s a domestic point. What we’ve seen in the United States with a hurricane like that is if it has a domestic effect, then the United States more than once took its own measures.”
In 2005 after hurricanes Katrina and Rita the IEA coordinated a release of reserves which saw European countries export refined products to the U.S. to complement Washington’s release of crude from its Strategic Petroleum Reserve. (Editing by Peg Mackey and Richard Mably)