IEA: Additional crude oil stock releases possible

By OGJ editors
HOUSTON, July 21
-- The International Energy Agency announced its completion of a 30-day review of the Libya Collective Action launched on June 23. IEA said it would take additional action if market conditions warrant.

The review concluded that the release of strategic stocks of oil among IEA member countries served a market need by adding liquidity and bridging the gap to additional supplies from the Organization of Petroleum Exporting Countries, the agency said (OGJ Online, June 23, 2011).

IEA said, “The Secretariat continues to closely monitor market conditions, and the IEA stands ready to augment the Libya Collective Action if market conditions again warrant. While we are not now seeking the release of additional stocks, the Action is not yet complete as stocks are still entering the market. To date, the Libya Collective Action involves just over 2.5% of public and industry obligated stocks.”

The Paris-based agency noted that the provision of extra supplies of crude—notably light-sweet crude from the US Strategic Petroleum Reserve—and products has had a number of beneficial impacts in the market, including:

• Sweet-sour crude differentials have narrowed overall, rendering light-sweet crudes more economic for refiners at a time of peak transport fuel demand.

• Tightness in prompt supply for light sweet crudes has diminished.

• Refining margins, notably upgrading margins, have improved, thus reducing the danger that suppressed refinery activity levels over the summer would lead to a products-driven supply crunch later in the year.

IEA also noted the rise in OPEC oil production. IEA estimates put June OPEC crude production at 30.03 million b/d, up 840,000 b/d from May, and a possible further rise of up to 200,000 b/d in July. IEA estimates that higher OPEC production and the Libya Collective Action should substantially cover the expected 1.3 million b/d increase in this year’s third-quarter “call on OPEC crude and stock change.”

However, a number of uncertainties remain that demand vigilance, notably the duration of the Libyan disruption, the future evolution of OPEC supply, and the final impact of the stock release itself, as much of the oil is only now entering the physical market, IEA said.

“The Secretariat has encouraged member governments to allow industry the maximum of flexibility in replenishing stocks, preferably waiting until yearend or beyond. Given that the action has not required any country to drop below the 90-day net-import requirement, the timing and pace of any replenishment are unlikely to be disruptive to the market,” IEA said.

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