IEAreleaseofreserves

IEA Says No Further Oil Release For Now
JULY 2011
An oil rig is silhouetted against the sunset in St. Lawrence, Texas May 9, 2008. Oil jumped to a record above $126 a barrel on Friday, extending gains to more than 11 percent since the start of the month on fuel supply concerns and a rush of speculator buying. REUTERS/Jessica Rinaldi
Oil up on IEA decision, US data, Greece optimism Q+A-What next after IEA decision not to release more oil? Japan extends relaxed oil reserve rule after IEA request IEA yet to decide on second oil release -Tanaka Italy would not block emergency IEA oil release French min says "nothing is planned" for IEA release
GERMANY, ITALYAMID ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO HOVER SEVERE POWER INTERNATIONAL WITHOIL HIGHS GAS IEA RELEASE ON MAY ECONOMIC ON WEAK OIL CHINA SHINES THE RACE TO FEED RELEASE RELEASE SPECIAL PDF FURTHEROPPOSE ANOTHER IEA DOLLAR COAL GRAPPLESCHINAS ENERGY WOES NOW OIL - ENERGY AGENCYWOES DEMAND FROM GOLD, GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF RESERVESRELEASE FORSHORTAGES BALIRESERVES GOLD PRODUCERS INVESTOR, ANDENERGY NEEDS INENERGY DEMAND DEBATE MAY 2011
JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE
Oil up on IEA decision, US data, Greece optimism

By Matthew Robinson NEW YORK, July 21 (Reuters) - Oil rose for a third straight session on Thursday, lifted by upbeat U.S. economic data, signs of a deal to bail out Greece and confirmation the International Energy Agency would not release more emergency stocks for now. The market shook off early losses caused by weak economic data from China and turned positive as euro zone leaders were set to give their financial rescue fund new powers to help Greece overcome its debt crisis, easing concerns that have weighed on oil and other markets in recent weeks. "Expectations that the debt problems in Europe could be resolved has sent the euro rallying, weakening the dollar," said Tom Knight, trader at Truman Arnold in Texarkana, Texas. "The stock market is also up on those hopes, also a factor in support of oil's rise today." Further support came from upbeat data showing factory activity in the U.S. Mid-Atlantic region bounced back in July, as well as news members of the IEA decided against releasing more oil stockpiles despite the threat of high prices to the economic recover. Brent traded up 57 cents to $118.72 a barrel at 12:46 a.m. EDT (1646 GMT). U.S. crude rose $1.44 to $99.84 a barrel. U.S. futures briefly topped $100 a barrel for this first time since June 10, breaking out of this month's trading range between $93 and $99 a barrel. Graphic: ( http://link.reuters.com/jen72s ) Trading volumes, which have been light all week, were around 50 percent below the 30-day average in early afternoon activity.
Traders have also been eyeing U.S. efforts to avoid a potentially disastrous debt default, with pressure mounting on the White House and Congress to speed efforts to cut a deficitreduction deal. NO NEW IEA PROPOSAL The IEA shocked oil markets in June, announcing it would release 60 million barrels of oil to help replace disruptions of Libyan supply and bring down prices. Prices initially plunged, but in the month since the announcement, Brent prices have climbed back more than $10 a barrel. But on Thursday, the energy watchdog for the industrialized nations confirmed what many analysts had expected, saying not a single one of its 28 members had asked for more oil to be released, including the United States, one of the architects of the first release a month ago. An IEA official told Reuters the Obama administration had no plans to act unilaterally and release oil from its own reserves, despite ongoing concerns about the impact of high pump price on consumers. Total U.S. product demand continues to lag year-ago levels, with demand for gasoline down 2.2 percent over the past four weeks -- the heart of the summer driving season -- compared to the same period in 2010, according to government data. "The IEA's statement that it will not release more emergency oil at this time is, in my view, bullish for the market, although there has been talk that they would do just that." said Phil Flynn, analyst for PFGBest Research in Chicago. CHINA CONCERNS Chinese manufacturing contracted for the first time in a year in July, as monetary tightening and sluggish global demand weighed on the economy, according to HSBC flash PMI.
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IEA RELEASE FURTHEROPPOSE ANDENERGY NEEDS INENERGY DEMAND GERMANY, ITALYAMID ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO HOVER OIL YET PDF ON WITHSECOND OIL ON SEVERE POWER INTERNATIONAL MAY ECONOMIC GAS CHINA SHINES THE RACE HIGHS ONRELEASE SPECIALTO DECIDE DEBATE TO FEED FOR IEA OIL RELEASE COAL GRAPPLESCHINAS ENERGY WOES NOW OIL - ENERGY AGENCYWOES DEMAND FROM GOLD, GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF RESERVESRELEASERELEASE DOLLAR GOLD PRODUCERS INVESTOR, ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011
Commodity markets are focused on the economy of China, the WHAT WILL HAPPEN TO THE OIL PRICE? world's second biggest oil consumer, as a major source of fuThe IEA has said its release helped to narrow a price gap beture demand growth. tween better quality oil and more difficult-to-refine crudes.
Q+A-What next after IEA decision not to release more oil?

By Barbara Lewis and Emma Farge LONDON, July 21 (Reuters) - The International Energy Agency said on Thursday it was not releasing further oil from emergency stockpiles for now, but stood ready to act again if needed. The following looks at some of the questions raised so far by the IEA's action. The group, which brings together 28 industrialised energyconsuming nations on June 23 announced the release of oil from emergency stocks and said it would review that decision by the end of this week. COULD THE IEA DECIDE ON A FURTHER RELEASE LATER THIS YEAR? Analysts who agreed there was no need for a further release yet say there could be a case for dipping further into emergency stocks later this year when demand will rise during the northern hemisphere winter. Following the loss of Libyan production, which stood at around 1.6 million barrels per day (bpd) before civil war erupted this year, both the IEA and OPEC had signalled a gap of roughly one million barrels per day between OPEC output and demand for the group's oil. On Thursday, the IEA said the oil market would be bettersupplied for the rest of 2011 following the emergency release and extra OPEC supplies. Even without a further release, another 20 million barrels or about one-third of the IEA's original supply injection of nearly 60 million barrels, could still trickle onto the market either through official country tenders or bilateral sales. Any decision on a future release is likely to depend on when Libyan crude oil exports resume, analysts said. "As long as a Libyan supply gap remains, a second release will continue to be on the table," said J.P. Morgan analyst Lawrence Eagles. COULD THE U.S. RELEASE RESERVES UNILATERALLY? In explaining its use of emergency stocks, traditionally kept for times of severe shortage, the IEA has placed prime emphasis on the loss of Libyan barrels, although it also cited economic weakness. The United States is seen as particularly anxious about the economic implications of high oil prices in the runup to a presidential election. Some analysts consider it could unilaterally release oil from its Strategic Petroleum Reserve in the event it cannot convince the IEA as a whole to act. "One thing I could not rule out is a further release of SPR and I think this is a valid response as there is concern about tightening in the third and fourth quarters," said Tony Duet, chief investment officer at Duet Commodities. The United States was responsible for half of the June release and its high-quality SPR crude, similar to that pumped by Libya, was seen as a very useful addition to the market. In Europe, where many were said to be far less convinced of the need for action, much of the stock released comprised products or heavier crudes, such as Iranian barrels offered by Germany.
Light, sweet West African benchmark grades have fallen to eight-month lows this week. Traders said the IEA release had also helped to slow the rally in North Sea grades spurred by supply disruptions. At the same time, some refiners enjoyed increased profits as the cost of their feedstocks decreased. Overall, futures markets, with Brent over $118 a barrel on Thursday , are still above levels immediately before the IEA release, although some analysts say the possibility of further action could be curbing trader activity. Others saw the potential for prices to rally sharply as finite levels of consumer stocks might struggle to compensate for the loss of oil from Libya, which the IEA has predicted will not begin to flow again until late next year. Equally, no-one can rule out the possibility of further unexpected disruptions, for instance because of the U.S. hurricane season. "What they've done is release six weeks' worth of Libyan oil but the problem hasn't gone away," said Duet. "I think the release is a bullish signal but only in a few months' time. They are kicking the can further down the road. It will weigh on prices in the short term but increase velocity of the move up in future." COULD IRAN, SAUDI RIVALRY DENT THE PRICE? Saudi Arabia and its Gulf allies were said to have been informed of the intention to release strategic reserves and were not necessarily violently opposed given their concern about the impact of high prices on oil demand. The Arab Spring has challenged Saudi Arabia's relationship with the United States, which Saudi Arabia considered abandoned Egypt's toppled ruler Hosni Mubarak, regarded as a crucial regional ally against the rise of Shi'ite Iran. At the same time, Saudi Arabia cannot afford to lose U.S. backing against Iran, its biggest regional foe. Already-bad Saudi-Iranian relations have deteriorated over Bahrain, where the Shi'ite majority has protested against the country's minority Sunni rule. Sunni-led Saudi Arabia might calculate countenancing further U.S./IEA reserves releases is a price worth paying. And although the Arab Spring has raised the oil price needs of many OPEC members as they have increased social spending to try to quell unrest, Saudi price requirements remain lower than Iran's, analysts say. After Iran -- OPEC's second biggest exporter after Saudi Arabia -- led opposition to Riyadh's proposal to increase output at the June OPEC meeting, Saudi and its Gulf allies increased suppplies regardless of the lack of formal OPEC sanction. They could fight for market share and offer their crudes at discounted rates into the market. So far, however, Asian refiners, for instance, are saying both Saudi and Iranian crudes are too expensive. Saudi Arabia has always said its policy is to supply the amount of crude the market needs and to seek a moderate prices acceptable for producers but not so high it destroys consumer demand.
WHAT IS THE STATUS OF OPEC-IEA RELATIONS? OPEC officials and delegates criticised the IEA's intervention. In comment that could be interpreted as handing the initiative back to Saudi Arabia, IEA Executive Director Nobuo Tanaka on Thursday said Saudi Arabian output would rise to 10 million barrels per day (bpd) in July. That follows on from 9.8 million bpd in June, according to a senior OPEC delegate. WHAT HAPPENS IF THE EXTRA OIL LEADS TO A PRICE COLLAPSE? An oil price collapse would be almost guaranteed to reunite a divided OPEC, which could curb output to try to force prices higher again. The group demonstrated record levels of discipline in curbing output in early 2009 after agreeing its biggest ever production cut in December 2008 when oil prices crashed below $40 a barrel. Although developed economies have reduced their energy intensity, high oil prices are still considered a major problem in times of economic crisis for consumer countries and a boon for the producers. The most recent OPEC statistics showed the positive impact rising prices had on member countries in 2010, even before the rally gained further momentum this year. Richard Batty of Standard Life Investments drew a contrast between the 48 percent gain in GDP across OPEC countries between 2006 and 2010 and the economies of consumer countries. "For oil importing nations such as the U.S., GDP was up just 9 percent over the same period, reflecting the effects of the recent financial crisis and recession along with the negative terms of trade effects of importing good and services, most notably oil," said Batty.
Japan extends relaxed oil reserve rule after IEA request

TOKYO, July 22 (Reuters) - Japan's trade ministry extended a relaxation of commercial oil reserve requirements until Dec. 31, in line with a request by the International Energy Agency that member countries not move too quickly to replenish strategic stockpiles drawn down in recent weeks in a collective move to stabilise the market. The IEA said on Thursday it would not release further strategic government stockpiles held by industrial consumer nations for now, noting that producers had boosted supplies. Japan last month relaxed reserve requirements for refiners and importers to 67 days' worth of consumption, a three-day reduction, with effect for one month, until July 26. The reserve reduction was part of a coordinated release of 60 million barrels of emergency stockpiles by IEA members, as concern grew that high oil prices were hurting a fragile global economy. The move triggered a short-term 10 percent drop in crude oil prices, although they have since rebounded. The relaxed requirement had a greater than expected impact on reserves, with commercial reserves of crude and oil products falling by 1.42 million kilolitres (8.9 million barrels) during the two weeks to July 16, compared with the target of a 1.26 million kl (7.9 million bbl) reduction. With the release of 1.42 million kl, we think we have achieved our role as part of the collective release," a ministry official said. "IEA says there would be adverse effects if we replenish stocks quickly, so I think stockpiles will be restored gradually (by the end of this year)." The official declined to specify the breakdown of crude and product stockpiles, although the ministry initially expected oil firms to draw down mostly oil products.
A security officer patrols the entrance to the Engen refinery in Durban as workers continue striking for a second week, July 18, 2011. Labour unions are demanding a 13% increase in wages as well as the banning of labour brokers. REUTERS/Rogan Ward
IEA RELEASE FURTHER SECONDFEED FORSHORTAGES BALIRESERVES SAYS NO HOVER ECONOMIC YET PDF ON WITHOIL ON SEVERE POWER INTERNATIONAL THE RACE HIGHS GAS CHINA SHINES ENERGY ENERGY WOES NOW SPECIALTO DECIDE DEBATE TO OILONRELEASE OIL COAL GRAPPLESCHINAS AGENCYWOES DEMAND FROM - RESERVESRELEASERELEASE DOLLAR GOLD, GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF AMID ASIA OIL ANDENERGY NEEDS INENERGY DEMAND GOLD PRODUCERS INVESTOR, INDUSTRYCONFERENCE IN KUALA LUMPUR WEAK MAY 2011
IEA yet to decide on second oil release -Tanaka

By Risa Maeda TOKYO, July 19 (Reuters) - The International Energy Agency has not yet decided whether member countries would conduct a second release of emergency oil reserves, executive director Nobuo Tanaka said on Tuesday. The IEA in June announced a release of 60 million barrels from emergency stockpiles for one month - the third such move in the agency's history - in a temporary measure to fill a supply gap caused by disruptions in Libyan output.
There is no sign yet of the kind of shortage to mandate another dip into the West's emergency oil reserves when a 30day deadline for assessing the impact of the first release expires at the end of this week, traders and analysts say. Germany and Italy are expected to oppose any second release of emergency oil reserves by the IEA because they were not much in favor of the decision in June, sources have said. Tanaka also said the IEA has enough oil to take a step as the last one for 24 months more if necessary.
The release also followed the failure of leading OPEC member Saudi Arabia to convince the group to increase supplies. By Alberto Sisto "In a preemptive move to avoid a serious risk scenario, we released our reserves and we understand the release was a success for now," Tanaka told Reuters on the sidelines of a seminar in the city. "Whether to release further or hold on to wait and see is a matter of decision" by member countries. The agency was also checking for how long top exporter Saudi Arabia would continue to increase output, Tanaka told the seminar. He said many market participants expect the kingdom to keep output at higher levels in July. Before announcing the latest emergency release , the IEA had held consultations with the kingdom and received a pledge from the OPEC leader that it would keep output at raised levels, Tanaka also said. Graphic on Saudi production: ( http://r.reuters.com/xad99r ) Oil consumption by region: ( http://r.reuters.com/gyb89r ) In defiance of a refusal by the Organization of the Petroleum Exporting Countries to back an output rise, Saudi Arabia independently increased its output, which hit 9.8 million bpd in June, a senior Gulf OPEC delegate told Reuters. The IEA's oil market report released last week showed Saudi Arabia had raised output by 700,000 bpd in June from a month earlier. The agency is also assessing how much of the oil it decided to release last month had reached the market, said Tanaka, on his last official trip before his term ends on Aug. 31. BOOSTING SUPPLIES The IEA is aiming to complete consultations with all 28 member countries by July 23 and decide whether to draw further from emergency stocks, he added. The latest oil market report suggested that the growth in the call on OPEC crude and stock change exceeded 1 million bpd in July, a sign supplies in the market are tight, he said. The estimate did not include IEA's stock release and if it did , a large part of the over 1 million bpd would be covered by the release, Tanaka said. "Our assessment on how and how much our released oil is entering the market in July is still on, but I think more than half of the over 1 million bpd is covered by our stock release," Tanaka said. "That's why we are saying the release has had a positive impact." The previous release by the IEA was in 2005 when Hurricane Katrina devastated oil infrastructure in the U.S. Gulf of Mexico. The only other release in the 37-year history of the IEA was at the time of the first Gulf War.
Italy would not block emergency IEA oil release
ROME, July 20 (Reuters) - Italy will not formally oppose a release of emergency oil stocks by the International Energy Agency (IEA) though it is not convinced by the strategy, Junior Industry Minister Stefano Saglia said on Wednesday. A French government source said last week Italy and Germany were expected to oppose any second release of emergency oil reserves by the IEA, which needs the backing of all 28 members if it is to pour more oil into a volatile crude market. "The measure doesn't convince us but in the end we won't oppose it," Saglia told Reuters. In June, the IEA announced a release of 60 million barrels from emergency stockpiles for one month - the third such move in the agency's history - in a temporary measure to fill a supply gap caused by disruptions in Libyan output. Saglia said Italy did not believe releasing emergency stocks would have any durable effect on prices. "You just need to see what happened, as soon as the reserves were built up, prices rose again," he said. Oil rose over a dollar on Wednesday after weekly U.S. stockpiles data showed larger-than-expected drops in crude inventories, and on hopes of progress in debt talks on either side of the Atlantic. Oil consumption by region:( http://r.reuters.com/gyb89r ) On Tuesday, IEA's Executive Director Nobuo Tanaka told Reuters the agency had not yet decided whether member countries would conduct a second release of emergency oil reserves. The release in June also followed the failure of leading OPEC member Saudi Arabia to convince the group to increase supplies.
French min says "nothing is planned" for IEA release

PARIS, July 19 (Reuters) - There are no plans for now for a coordinated second release by the International Energy Agency (IEA) of emergency oil stocks, French Energy Minister Eric Besson said on Tuesday. "Nothing is planned, but we don't exclude anything," he told a press briefing. The IEA in June announced a release of 60 million barrels from emergency stockpiles for one month - the third such move in the agency's history - in a temporary measure to fill a supply gap caused by disruptions in Libyan output. IEA Executive Director Nobuo Tanaka told Reuters in Tokyo on Tuesday the agency has not yet decided whether member countries would conduct a second release of emergency oil reserves.
IEA RELEASE FURTHEROPPOSE ON WOES SHORTAGES BALIRESERVES GERMANY, IEAHOVER ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO YET PDF ON MAY SECOND OIL GAS DECIDE DEBATE HIGHS ON SEVERE POWER INTERNATIONAL THE DECIDE FEED FOR IEA OIL CHINA SHINES YET IN ECONOMIC ONRELEASE RELEASE SPECIALTO ITALY ENERGY ENERGY WOES NOW OIL COAL GRAPPLESCHINAS AGENCY TOBOOMING ASIA - RESERVES TO ANOTHER DEMAND FROM GOLD, GLITTERSON TORACERELEASERELEASE DOLLAR SILVERSILVEROF AMID NEAR ASIA'S SECOND NEEDS INENERGY DEMAND GOLD PRODUCERS INVESTOR, ANDENERGY OIL RELEASE WITHOIL WEAK MAY 2011
No need for more IEA oil reserves yet

By Barbara Lewis and Muriel Boselli LONDON/PARIS, July 18 (Reuters) - There is no sign yet of the kind of shortage to mandate another dip into the West's emergency oil reserves when a 30-day deadline for assessing the impact of a first release expires at the end of this week, traders and analysts say. And now the market has learnt to brace for the unexpected, it would take an even bigger shock than last month's nearly 60 million-barrel supply injection to have a significant impact on prices of more than $116 a barrel for Brent crude. For another International Energy Agency release to take place, it would have to be endorsed by all 28 members of the energy consumer body. Germany and Italy are likely to resist any plans for a second release for now, a French government source told Reuters last week. Analysts from across the producer-consumer divide agree that does not mean another release will not happen this year. Some do not even rule out unilateral action by top oil consumer the United States, which provided 30 million barrels of the June 23 release. "The IEA will undoubtedly repeat the release of oil from inventory in the last quarter of 2011 but probably not again this summer," said Sadad al-Husseini, an oil analyst and former top official at state oil giant Saudi Aramco.
"We don't see a strong response to the incremental Saudi oil offerings and that must mean that the market cannot absorb any additional oil supplies at the current prices. "By year-end, the situation will be different. This is because supplies will again be lagging demand and will remain so over the next two years." The IEA's announcement of emergency supplies in June followed the failure of leading OPEC member Saudi Arabia, traditionally a price moderate and U.S. ally, to convince the group to increase supplies. In defiance of the Organization of the Petroleum Exporting Countries' refusal to back an output rise, Saudi Arabia independently increased its output, which hit 9.8 million barrels per day (bpd) in June, a senior Gulf OPEC delegate told Reuters. Not all of that will make it to international markets. The IEA in a monthly report last week made a case both for more action and inaction, analysts said. It noted Saudi Arabia was this year burning record amounts of oil, averaging nearly 600,000 bpd, to meet domestic demand for power. In common with a report from OPEC, the IEA found a gap of around one million bpd between expected OPEC production and anticipated demand for its oil.
Men work at an oil pump near the coast on the outskirts of Havana June 10, 2011. REUTERS/Enrique De La Osa
But it also said the June release had helped to narrow a pricing gap between high-quality, light, easy-to-refine crude and heavier grades, even if the overall oil price has bounced to higher levels than before the IEA supply injection.
PRE-EMPTIVE ACTION?
That does not suggest an immediate crisis, but some analysts saw an argument for pre-emptive action before the peak demand final quarter of the year, especially as incremental "They have given themselves justification to do just about any- Saudi Arabian oil tends to be heavy and unsuitable for some thing they want. I'm sure it will be a lively debate internally," refiners. said Mike Wittner, an analyst at Societe Generale, who used to "To get the crude out to the market in September, they would work for the IEA. have to act soon," said Bob McNally, a former White House For him the most likely outcome of this week's review would be a statement the IEA would continue to monitor the situation. "It's hard to pull the trigger again on another release when you don't know how much of what's already been released has been taken up," he said. The IEA said slightly less than the 60 million barrels initially announced would be released, but so far the take-up rate had been higher than after its previous release in 2005 when Hurricane Katrina devastated oil infrastructure in the U.S. Gulf of Mexico. energy official who runs energy consulting firm Rapidan Group, which accurately predicted the first measure. He took the view U.S. officials were likely to seriously consider pushing the IEA to release more oil. "The odds of another release are much higher than the oil market expects," he said. "While it's not a foregone conclusion, it's a good possibility." The United States is seen as particularly keen for lower oil prices in the run-up to a presidential election and when the economy is fragile.
Just as Saudi Arabia might have been more comfortable actTo date, the only other release in the 37-year history of the IEA ing with the backing of OPEC as a whole, it would be more was at the time of the first Gulf War, while the United States convenient for the United States to work within the IEA frameon rare occasions has independently released oil from its Stra- work. tegic Petroleum Reserve. But in Europe, high levels of tax mean consumers are more This time, all of the 30 million barrels made available by the resigned to high prices and less sensitive to rises on internaUnited States has been sold into the market, but a German tional markets. government official, asked about a possible further release, The IEA has said its reserves release is primarily designed to noted not all of the reserves had been "fully utilised". meet the supply shortfall left by the loss of Libyan barrels to The IEA's report said inventory levels had dropped, taking civil war, although it has also mentioned a need to protect the onshore stocks at the end of June "close to five-year average economy. levels" after many months of being substantially higher than historical levels.
Only output disruption from another significant oil producer would warrant another release at this point, said Emmanuel Painchault, analyst with Edmond de Rothschild Asset Management. "There are enough commercial stocks around and even though we expect them to fall in the coming months, this does not justify exaggerated interventionism," he said. If the IEA's aim is to lower prices to protect the world economic health, analysts said it needs to do much more -- and even then, market reaction would be very hard to predict. "I think that the IEA has now lost the initiative in the market. It would have had a much better chance of holding the oil price lower had it, for example, released more oil the following week," said Chris Weafer, chief strategist at Uralsib in Moscow. Oil prices initially dropped around 6 percent , but rebounded swiftly. "The first exercise has shown us that to achieve a significant and sustained fall in the oil price a much bigger intervention by the IEA is required," said Neil Atkinson of Datamonitor. "Also, releasing crude oil is only part of the answer. It is products that count for end-users and unless crude is refined it is merely transferred from one stock holder to another." For a PDF of Reuters reports on this topic: ( http://link.reuters.com/jac42s ) For related graphics, please click on: ( http://r.reuters.com/xew32s) ( http://r.reuters.com/xuv62s )
The Baltic Exchange's rate for 260,000-tonne crude tankers from West Africa to China edged up to W47.67 from W47.50 last week. The market hit a 2011 low of W47.07 last week. "A sluggish start to the week with little fresh enquiry as charterers hold back as the few remaining cargoes from last week are picked off," said broker firm ICAP. Rates for 80,000tonne aframax tankers from Southeast Asia to East Coast Australia eased to W97.33 from W97.39 last week. The market has hovered near levels seen in early March for the past six weeks. PRODUCTS Clean rates for Long Range (LR1) tankers on the benchmark TC5 Middle East to Japan route rose to a two-week high of W124.81 on Monday from W121.31 last week. "The market is expected to remain around W125 on the back of the activity of last week, but if the market remains quiet it could easily slide back to W120 levels," ICAP said. The clean tanker market could find support from rising demand for fuel oil and gas oil in Asia. Fuel oil is likely to continue on the uptrend that started from the end of last week, as the August pricing month starts, after weakening unabatedly for the last two weeks. Gas oil could also strengthen with Indonesia buying more supplies to meet seasonally strong demand ahead of the fasting month in August. In the intra-Asia market, medium range (MR) tankers travelling from Singapore to Japan eased to W146.86 from W147.36 last week. The Baltic Exchange's rate for South Korea to North America's West Coast edged up to a two-month high of $32.21 from $32.09 last week.
Asia Tankers-Crude freight rates to ease ahead of IEA decision

By Randy Fabi SINGAPORE, July 19 (Reuters) - Rates for crude oil tankers on key Asian freight routes are expected to ease this week on fears industrialised nations will release more emergency reserves, dampening freight demand. For clean tankers, rates are seen slightly higher on rising Asian demand for fuel oil and gas oil, shipbrokers said on Tuesday. CRUDE Rates on the benchmark Very Large Crude Carrier (VLCC) export route from the Middle East to Japan rose to a over twoweek high of W49.85 on Monday from W49.03 last week. The market has traded in a tight range near two-month lows for the past two weeks, awaiting news on whether or not the International Energy Agency will approve a second release of emergency oil reserves. The IEA is expected to confer with member countries by July 23, when a 30-day deadline for assessing the impact of a first release expires. "Any additional IEA strategic oil inventory release could preempt the needed OPEC production increase and delay the anticipated recovery in tanker demand," said Douglas Mavrinac, analyst for Jefferies & Company. Demand for VLCCs to transport crude oil remained strong in the Middle East with 124 fixtures for July loading so far, two more than in June, according to Meiwa International.
A vendor holds a bottle of gasoline to refuel a motorcycle along a street at the outskirts of Phnom Penh July 18, 2011. Cambodian Prime Minister Hun Sen announced last week the country is expected to produce its first oil by December 12, 2012, according to local media. Oil companies are operating off Cambodia but the country is not expected to produce its first oil until 2012. REUTERS/Samrang Pring
Germany, Italy may resist 2nd IEA oil release

By Muriel Boselli
PARIS, July 15 (Reuters) - Germany and Italy are expected to oppose any second release of emergency oil reserves by the International Energy Agency, which needs the backing of all LIMITED MARKET IMPACT 28 members if it is to pour more oil on a volatile crude market. The French government source said Italy's opposition to a The IEA is expected to confer with its member countries by further supply release was in part based on its historic relaJuly 23 to decide whether to draw further on emergency oil tionship with Libya, while analysts have said Germany's appestocks after its announcement last month of a 60 milliontite for further action could be tempered by its relative indifbarrel release, only the third such move in its history. ference to high oil prices given the strength of its economy. "Germany and Italy were not much in favor of the decision The IEA has presented its use of strategic stockpiles primarily back in June," the French government source said. "While the as a response to the supply shortfall created by the loss of decision was unanimous not all were committed." OPEC member Libya's barrels to civil war. Asked whether they would resist this time, the source said: "This is likely." Whether the IEA or its member states will intervene again in the hopes of buffering a fragile global economy is the subject of intense speculation in oil markets. European sources say that despite resistance from Italy and Germany, a second injection of liquidity has not been discarded offhand. The United States has, on rare occasions, dipped into its stocks unilaterally. And the IEA's own oil market report this week forecast a gap in global oil supplies for the third quarter, providing potential justification for more oil. Bob McNally, a former White House energy official who runs energy consulting firm Rapidan Group, which accurately predicted the first measure, says U.S. officials are likely to seriously consider pushing the IEA to release more oil. "The odds of another release are much higher than the oil market expects," he told Reuters. EUROPEANS QUESTION NEED FOR INTERVENTION France would not lead any opposition, but neither would it press for a further release, the French government source told Reuters. A German government official Friday said not all the reserves released so far had been used when asked whether the IEA should add further oil to the market. The official was noncommittal, however, about Germany's stance, saying it was waiting for the IEA's opinion, and Britain took a similar line. "We will wait for the IEA to conclude their analysis at the end of July and they will make a decision in light of that," said Cameron Ramos for the Department of Energy and Climate Change. There could be objections on the principle that emergency reserves should not be used for intervening in markets. "This is not an operation (the oil stock release) that can be repeated indefinitely," said a European diplomatic source. Some analysts, however, have said the tactic was designed to lower oil prices at a time of global economic weakness and there was also a political element in the run-up to the U.S. presidential election. They say it differed from the two other releases in the IEA's 37-year history, which were immediate responses to sudden rather than ongoing supply disruption.
But doing so would require it to take time away from another even larger crisis. The Obama administration's first decision to release oil from the reserves was coordinated by Gene Sperling, his top economic advisor, who has since been deeply involved in talks to avert a looming U.S. government default.
Immediately after the June announcement, oil prices dropped by around 6 percent, but they quickly bounced back and Brent was trading above $116 a barrel Friday. A monthly report from the IEA this week "took a resolutely positive view" of its action so far, which it said had narrowed the price gap between high-quality, easy-to-refine oil and heavier, more sulphurous grades -- potentially providing an argument to do nothing further for now. But the monthly market report also signalled a continued supply gap of around one million barrels per day (bpd) between the amount of oil the Organization of the Petroleum Exporting Countries is pumping and the demand for its crude. In addition, it said leading exporter Saudi Arabia's domestic use of fuel to generate power was likely to hit record levels, averaging nearly 600,000 bpd. Higher domestic demand would limit the amount for sale on international markets from a rise in Saudi oil production, which a senior Gulf OPEC delegate said hit around 9.8 million bpd in June. "They (the IEA) have given themselves justification to do just about anything they want. I'm sure it will be a lively debate internally," said Mike Wittner, an analyst at Societe Generale who previously worked at the IEA. He thought, however, the most likely outcome of next week's 30-day review of the IEA's emergency reserves release would be a statement saying the agency would continue to monitor the situation. "It's hard to pull the trigger again on another release when you don't know how much of what's already been released has been taken up," he said. Analysts still rule nothing out, noting the first reserves announcement was a shock to oil markets, even if the price impact was not sustained.
If there is a second release, it would likely be announced by the end of July so that the barrels could be primed to hit world "This does not mean the move will not be repeated but this is markets before the end of the third quarter, a period when IEA an operation which is and must remain exceptional. Otherwise has warned of potential supply shortages, Rapidan's McNally it loses its value. It is not a tool for markets." said. "While it's not a foregone conclusion, it's a good possibility," he said. "I think from the beginning there were always two Even though a unanimous decision is needed for a release bullets in the chamber. They've only used one so far." within the IEA framework, the United States, which provided half of the initial supply injection, could act unilaterally as it has done via SPR loans a handful of times in the past. (Continued on page 10)
GERMANY, ITALYAMID ASIA OIL ANDENERGY NEEDS INENERGY DEMAND IEA RELEASE FURTHEROPPOSEINDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON WITHSECOND OIL YET RELEASE MAY ECONOMIC RELEASE OIL OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL PASSES ENERGY GAS CHINA SHINES THE RACE HIGHS WOES SPECIALTO DECIDE DEBATE TO FEED FOR IEA DOLLAR COAL GRAPPLESCHINAS AGENCYWOES DEMAND - ENERGY HALFWAYONRELEASE RELEASE GOLD, GLITTERSON IN NEAR ASIA'S TOBOOMING OIL FROM SILVERSILVEROF RESERVESRELEASEMARKNOW ASIA GOLD PRODUCERS INVESTOR, ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011
COLUMN-IEA succeeded in providing temporary liquidity: John Kemp

(John Kemp is a Reuters market analyst. The views expressed are his own) LONDON, July 15 (Reuters) - The International Energy Agency's decision to order the release of 60 million barrels from emergency oil stocks remains fiercely controversial, but on balance it should be considered a success. Many of the agency's harshest critics argue the release failed to achieve a lasting price reduction (economist Albert Hirschman's futility thesis) undermined its future credibility (the jeopardy thesis) and blunted price signals (the perversity thesis). But critics are judging the release against the wrong criteria. In its own terms, the release successfully provided liquidity over the summer when the supply of sweet crude was severely disrupted by North Sea maintenance programmes and the conflict in Libya. It almost certainly averted a panic about the shortage of benchmark grades that would have risked a severe price spike at a time when the global economy appears unusually fragile. Central bankers and investors have good reason to offer thanks to the agency for averting a much worse outcome. COUNTERFACTUALS Critics charge the IEA release was futile because spot prices quickly returned to levels observed before the announcement. But this is the wrong comparison. The correct comparison is not between prices before and after the stock release but between prices after the release and what they would have been if the release had not happened. "Ultimately, the IEA release will have to be judged subjectively in the answer to the impossible question of how different prices prove to be relative to the unobservable counterfactual case in which there was no release," as analysts from Barclays Capital explain in a recent note. The fact the counterfactual is unobservable does not make it any less relevant. There are plenty of reasons to think the market would have become exceptionally tight over the late summer. Without the comfort provided by the stock release, fears about the availability of light sweet crudes would probably have triggered a panicdriven price surge. As my colleague Robert Campbell has noted, natural field declines coupled with an unusually heavy summer maintenance programme will cut output from the four streams on which Brent futures are priced (Brent, Forties, Oseberg and Ekofisk) to less than 900,000 barrels per day in August, the lowest level since 2007. Reduced output from the North Sea together with the ongoing loss of Libyan exports and the expected rise in refinery throughput to meet summer driving demand pushed prices for August Brent futures to a steep premium of more than $2 per barrel over September when the August futures contract expired on Thursday (http://graphics.thomsonreuters.com/ ce/BRENT-SPREADS1.pdf). If the market was that concerned about the shortage of sweet crudes with the stock release, most of which will become available in August, imagine how severe concerns would have been if the IEA had not released stocks. In the absence of a release, prices for August crudes would almost certainly have risen much higher, with attendant risks to the recovery.
TEMPORARY LIQUIDITY The IEA's release may not have been able to prevent tightness in the market at the end of the summer completely, but it does seem to have contained the fears, and convinced participants shortfalls will be confined to a few weeks in August, not leave the market persistently short into the autumn and the winter heating season. While the Aug/Sep timespread flared out to more than $2, up from 45 cents prior to the IEA announcement, other timespreads fell sharply and have stayed low. The Sep/Oct spread has fallen from 32 cents before the announcement to around zero in recent days. Spreads had been softening since Saudi Arabia indicated it would boost supplies by up to 1 million barrels per day following the breakdown of the OPEC meeting on June 8. But more than half of the reduction came after the IEA announcement, implying market participants believe the stock release will play a crucial role in preventing tightness in the supplydemand balance lasting through the end of the year. In fact the IEA release coupled with Saudi Arabia's agreement to increase output has taken the spreads back to levels recorded at the start of the year before the loss of Libyan production. Like commercial inventories, the IEA's emergency stocks are not a substitute for production. They exist to dampen damaging short-term volatility. The stock release appears to have performed that role admirably well. Market participants remain concerned about the shortage of North Sea crude production in August. But the release combined with higher Saudi output has convinced most the shortfall will be confined to a single month and not cause a legacy of tightness in September and beyond. It is hard to see how the stock release could have achieved much more.
A drilling rig in the Eagle Ford Shale in South Texas is seen in this Petrohawk Energy Corporation handout photograph released to Reuters on July 14, 2011. Mining and oil company BHP Billiton unveiled a $12.1 billion agreed takeover of U.S. gas producer Petrohawk Energy Corp on Friday, marking the Anglo-Australian firm's biggest step into the booming shale-gas industry. REUTERS/Petrohawk
World oil demand to strain supply in 2012-IEA

By Alex Lawler and Barbara Lewis LONDON, July 13 (Reuters) - World oil demand growth will accelerate next year, adding to the pressure on available supplies, the International Energy Agency said on Wednesday, contradicting a more conservative outlook from producer group OPEC. In its first 2012 forecast in a monthly report, the IEA said oil use would grow by 1.47 million barrels per day (bpd) to 91 million bpd. The agency also trimmed its estimate of demand growth this year to 1.20 million bpd.
According to the IEA, Saudi Arabia pumped 9.7 million bpd in June, just shy of the 9.8 million bpd cited by a senior Gulf OPEC delegate on Tuesday. Overall, OPEC production in June increased by nearly 850,000 bpd compared with May, the IEA said, but it still took the view that OPEC oil output would remain well short of expected demand. It said demand for OPEC crude would average almost 31 million bpd in the second half of this year, around 1 million bpd more than OPEC produced in June. The IEA also said Saudi Arabia's crude exports could be eroded by a growing domestic need for oil for power generation, and OPEC's oil production capacity would struggle until Libyan output began to recover.
The IEA's 2012 prediction was more than the 1.32 million bpd expected by OPEC and lower than a forecast from the United It did not expect a Libyan recovery to happen until the end of States' Energy Information Administration. It expects all of the 2012 and said OPEC capacity would fall to a low point of growth next year to come from emerging economies. around 33.8 million bpd in the first quarter of next year. "Aside from economic growth, downside pressures from higher-than-expected oil prices also represent a risk to the forecast," said the Paris-based IEA, which advises 28 industri- Chevron wants UK level playing field in IEA alised countries. release Differences between the Organization of the Petroleum Exporting Countries and consumer nations widened after the 12member OPEC in June failed to reach a deal on a Saudi-led proposal to increase output. In response, the IEA decided to release oil from emergency stocks for only the third time since it was founded in 1974 to fill the gap in supplies left by the disruption to Libya's output. The IEA on Wednesday maintained the stocks move had added supply of high-quality crude to a tight market and the agency took "a resolutely positive view" of the strategy so far. "The point of the stock release was to add some liquidity and flexibility into the market. I think we've done that," David Fyfe, head of the IEA's oil industry and markets division, told Reuters Insider. Oil , trading at $117 a barrel on Wednesday, is higher than it was before the release. OPEC said the use of stocks had had no impact, while investor Jim Rogers on Wednesday called it "meaningless" to the market. Fyfe said the IEA had yet to decide whether it would release more supplies and reiterated it would make a decision 30 days after the initial announcement on June 23. Reuters Insider interviews with IEA and Jim Rogers: ( http://link.reuters.com/kaf62s ) ( http://link.reuters.com/qyh62s ) 2011 DEMAND GROWTH TRIMMED Next year's demand expansion follows on from lowered expectations for this year. By Jessica Donati
LONDON, July 8 (Reuters) - U.S. oil major Chevron hopes for a commitment by UK regulatory and government agencies to ensure a level playing field under the terms of the International Energy Agency (IEA) stock release plan, a spokesperson told Reuters on Friday. "Chevron hopes for a commitment by regulatory, government agencies to ensure a level playing field that allows a sustainable return on investments wherever we operate," the spokesperson said. Britain was one of 12 European countries told by the IEA to make emergency crude and refined products available to help temper high oil prices. A total of 19.2 million barrels was to be released in Europe either through tenders or by reducing minimum storage requirements. The regulatory agency asked Britain to make around 2.4 million barrels of refined product and 600,000 barrels of crude oil available. Critics have described the IEA programme as disorganised, with methods varying from country to country, and say this has created confusion in the market. Britain's emergency fuel stocks are held by individual companies and not by a central body, unlike the system in other countries such as Germany. Chevron declined to comment on how strategic stock positioning had been handled in the UK, saying the figures on volumes were commercially sensitive. The company also did not say whether it would have preferred the volumes to have been released via a Dutch or Germanstyle tender.
In the report, the IEA trimmed its 2011 global demand growth estimate by 70,000 bpd, citing the impact of high prices and a Many traders do not expect UK reserves to be released from storage, since the lack of a central stockholding body has weaker economic outlook for developed economies. meant that sales have been left to the discretion of oil firms While OPEC did not formally agree to boost its supplies at last that have no obligation to tender or sell it. month's meeting, the IEA report added to evidence that core Britain's Department of Energy and Climate Change said this members are pumping more crude. week it was considering setting up a central oil stockholding The IEA said OPEC output rose significantly in June following body following a warning that emergency stocks could fall a unilateral supply increase from the group's leading exporter, short within the next 10 years after new European requireSaudi Arabia. ments next year set higher storage obligations.
IEA move could add to storage, gold appeals

By Claire Milhench LONDON, July 12 (Reuters) - The IEA's decision to release some 60 million barrels of oil from its strategic reserves could lead to more people buying oil to store it, said Robert Farago, head of asset allocation at Schroders Private Banking. "Their action doesn't seem to make sense to us or the market," Farago told Reuters as tenders for the International Energy Agency's release got underway. "By taking oil from stocks they are satisfying current demand, but creating more demand in future. That is why we haven't seen much of a shift in price at the long end of the curve, but you've had quite a dramatic move at the short end." He said that the U.S. crude forward futures curve is in a very steep contango, which could encourage people to buy oil and store it. "In which case, releasing more from stocks will just feed those people with storage capacity," he said. His cross-asset portfolios are currently exposed to the oil complex through energy equities, added in autumn 2010 when energy was lagging other commodities. Schroders was also worried about inflation, and historically oil has been a good hedge against this. "We felt equities were on attractive valuations and in the 1970s, when there were broader inflation worries, energy equities outperformed," he said. On a three-year time horizon he saw little spare capacity in the oil market as demand growth in emerging markets will eat away at it. "Looking beyond that, the market will be tight and that should be good for energy equities," he said. STRATEGIC ROLE Farago believes that oil and gold have a strategic role in investors' portfolios but agricultural commodities do not. "Oil is an essential driver of modern society and in a number of forms is irreplaceable," he said.
Gold is seen as a strategic investment because it acts as a store of value and alternative currency. Spot gold is currently trading at around $1,546 an ounce as investors worry about the spreading eurozone debt crisis. "It is quite hard to justify the current price but the long term upward trend is unlikely to change until we see a significant change in policy direction that leads to greater confidence in fiat currencies," Farago said. He attributed some of the current high price to a lack of confidence in the U.S. being able to tackle the federal budget deficit, with the Democrats and Republicans still slugging it out. "I think it will take a crisis to get them to change direction and gold is likely to do well in a crisis. We haven't had a proper currency crisis yet." About 7 percent of his balanced portfolio is in gold bullion ETFs, but he is also holding some gold mining shares within the equity allocation. "Gold shares have been disappointing performers. They have suffered as the oil price has gone up, which puts downward pressure on their margins. Now the oil price has come off but they haven't recovered, so we think that's an opportunity," he said. "The relative valuations look attractive." He argued that the drivers for agricultural commodities are cyclical, due to bottlenecks in supply, and so there are less compelling reasons to hold them. "We are already seeing a significant supply response to the increase in prices," he said. The U.S. Department of Agriculture said at the end of June that farmers had planted the second largest acreage with corn since World War II. Inventories are also 11 percent higher than expected. The news pushed corn to three and a half month lows. Schroders Private Banking had some 16.4 billion pounds ($26.29 billion) under management at end-March 2011.
EU Commissioner for Energy Guenther Oettinger (L) and Iran's Minister of Petroleum and President of the OPEC Conference Mohammad Aliabadi attend a news conference after the EU-OPEC Energy Dialog in Vienna June 27, 2011. REUTERS/Herwig Prammer
IEA trims total oil volume planned in release

By Alex Lawler LONDON, July 11 (Reuters) - The International Energy Agency (IEA) on Monday said the amount of oil made available from emergency reserves, to make up for disrupted Libyan supply, would be slightly less than earlier stated after sales by member-countries met with mixed demand. Oil available under the plan will amount to 59.83 million barrels, down 784,000 barrels from an earlier estimate, said the IEA, an adviser to 28 industrialised countries, in a statement on its website. The reduction follows "restrained" demand for a sale by Germany, Europe's biggest oil consumer, of stored oil and slightly higher than expected crude sales by the United States in its largest-ever auction of emergency supplies. Oil prices fell to around $115 on Monday on concerns of slowing demand . Analysts at JBC Energy said the tweaked IEA numbers did not alter their view that not all of the total amount would be released onto the market. "There's what they say will be released and what they actually release. We expect of the total only about 50-60 percent to come out, and not much of that will be from Europe," said David Wech, an analyst at JBC. The IEA trimmed the amount coming from Europe, which is expected to provide 17.81 million barrels, down from 19.24 million previously, and said the crude oil proportion would be slightly less than earlier thought. More than half of the release is coming from the United States, which sold 30.6 million barrels of crude from the Strategic Petroleum Reserve (SPR), more than the 30 million barrels the IEA expected.
In Germany, the government sold off 63 percent of a total of 4.2 million barrels that were offered to the local market in tenders. It is unlikely to try to sell the rest, industry sources told Reuters last week. In what could also indicate limited immediate demand, France has extended the period in which stocks could be released by three months through to December. Some European countries, such as the UK, have opted to lower minimum stock requirements instead of offering the crude and products to the market via a tender. Traders say the lack of a sale tender by every IEA member has reduced the impact of the release on prices. Oil prices, at around $115 a barrel on Monday, are higher than they were on June 23, when the IEA announced the move to make 60 million barrels available. The agency says its plan is working. IEA officials said last week they hoped a sizeable part of the oil would be taken up and that the move was adding to supplies of high-quality crude, which had been reduced by the Libyan conflict. The stocks release is only the third in the IEA's history. Its last such move was in 2005 in the wake of Hurricane Katrina's disruption to U.S. supplies.
More than half of IEA oil release achieved

July 8 (Reuters) - The International Energy Agency on June 23 announced the release of 60 million barrels of oil and oil products from strategic government stockpiles. About 58 percent of the planned amount has been released or committed for release so far, according to Reuters calculations. The IEA, the adviser of 28 industrialised nations on energy policy, announced the release in a bid to push down crude prices and underpin the global economy. So far, the United States has been the largest contributor to the release, selling the full volume of its allocation. Officials in the Netherlands also expect it to sell all of its allotted volume. Other European countries have released only part, mostly due to sluggish industry and consumer demand, according to traders and government and industry officials. Below are the volumes that have been confirmed or committed for release so far as well as a breakdown on how the releases are being managed in different countries. VOLUMES RELEASED OR COMMITTED SO FAR Total: 34.83 million barrels U.S.: 30.6 million barrels Germany: 2.646 million barrels The Netherlands: 1.05 million barrels Belgium: 94,600 barrels South Korea: 441,000 barrels GERMANY Germany has sold via tenders 63 percent of the 4.2 million barrels allocated as a part of the IEA release, which amounts to about 2.646 million barrels disposed of in the tenders.
A gasoline pump is seen hanging at a petrol station in central Seoul, REUTERS/Lee Jae-Won
GERMANY, ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINAS OIL FEED FOR DEMAND - RESERVESRELEASEMARKNOW OIL FROM GOLD, SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR,RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011
The country has not yet made a decision about whether to sell the remaining volumes of crude and oil products, state stockpiling agency EBV said on Wednesday. More than half of Germany's sale of 2.1 million barrels of crude oil under the release programme will be heavy crude, a document seen by Reuters showed. UNITED STATES The United States sold more than 30 million barrels of crude from the Strategic Petroleum Reserve (SPR), its full allocation volume, in its largest-ever auction of emergency supplies, naming independent refiner Valero the top buyer. Overall 15 companies committed to pay $3.3 billion for 30.6 million barrels, preliminary results showed. Final results are due by July 11 but are unlikely to differ much from those released on Friday, a DOE source said. The average successful bid was $107.19 per barrel, about $3 below European benchmark Brent oil prices on Friday. THE NETHERLANDS The Netherlands may be the only European country set to release the full allocated volume under the IEA programme. The country is likely to sell 1.2 million barrels of crude oil and refined oil products, which is above the 1.173 million barrels shown in the table provided by the IEA. About 1.05 million barrels of Brent and Forties crude, condensate and diesel have been sold. Forties and condensate have been sold from tanks of companies, which hold oil stocks on behalf of the Dutch COVA stockpiling agency. Brent and diesel were sold via a tender, which the government body issued. COVA has reissued a tender to sell the remainder, or 150,000 barrels of diesel, after a last-minute revision to conditions late on Thursday. Many traders expect the diesel to be sold. Some traders attributed the success of the Dutch tenders to its mix of oil and products, which the market needed, and to its geographical advantage as Europe's oil trading hub. UNITED KINGDOM UK stocks allocated for release represent 3 million barrels. The government has not specified any volume that has been released under the programme or said whether any oil has been released at all. Unlike Germany, where a national organisation has issued tenders, UK sales will be at the discretion of oil firms. Companies holding emergency oil stocks have no obligation to tender or release them, a spokesman for the Department of Energy and Climate Change (DECC) said, indicating the oil may never leave storage tanks. As a crude oil producer, the UK is obliged to hold stocks equivalent to 67.5 days of consumption, but current stocks for most oil products are much higher at around 80 days, according to the DECC. A DECC spokesman said on Thursday Britain had no intention to extend the release period.
FRANCE France is among IEA member countries that have reduced minimum mandatory stock levels imposed on the private sector so that oil companies can release oil from their inventories. It does not plan to issue a tender to sell oil from their strategic petroleum reserves. France has extended the period in which it releases oil from inventories by three months until December, an energy ministry source said. That is partly because of the slow progress of the release. France had initially given private companies three months until September, during which they could release up to 3.2 million barrels. ITALY Italy's Unione Petrolifera said it would reduce minimum reserve requirements and sent companies a breakdown in tonnes of crude and product stocks. But companies with reserves in Italy said there were still doubts about how quotas would be distributed, adding that the final impact on the market would be minimal. Italy's allocation is 2.524 million barrels of oil products, including gasoline, diesel and fuel oil. SPAIN Spain is not due to hold tenders for releasing stocks as part of the IEA programme. A decree published about the release on June 29 required official stockpiler CORES to monitor reserves but did not provide for any tenders to sell the 2.274 million barrels of refined products Spain no longer needs to set aside under IEA requirements. The volume include gasoline, diesel and fuel oil. BELGIUM Belgium's allocation is 797,000 barrels of refined oil product. The oil stock-holding body Apetra said on Friday it had sold its part of national volumes allocated by the IEA but that the remainder would be managed by oil firms with no obligation to sell. Apetra said it had already sold 12,000 tonnes of jet fuel at market prices for July delivery, without naming the buyer. The volume is about 94,600 barrels, according to Reuters calculations. The remaining 94,000 tonnes or so are mostly distillates including diesel and will be offered at the discretion of oil firms holding the reserve stocks, Apetra general manager Alain De Mot said. "These volumes will be put at the market's disposal but they do not have to sell. If there is no demand, how can they sell it?," De Mot told Reuters last week. TURKEY Turkey's contribution of about 1 million barrels will be sold by Turkish refiner Tupras . On Monday, the IEA said in a conference call the oil would be available probably this week. But no update has been given. SOUTH KOREA South Korea initially planned to release 2 million barrels of crude and 1.46 million barrels of products from strategic stocks, but the totals have been updated to 1.948 million barrels of crude and 1.519 million barrels of products.
The total volume of 3.467 million barrels matches the allocation as a part of the IEA release programme. The release started on June 30, according to the economy ministry, and 29 percent of the oil products that will be made available had been released as of July 6. The percentage is equivalent to about 441,000 barrels, according to Reuters calculation. JAPAN Japan cut the reserve requirement for oil companies, making available 7.9 million barrels of crude and products from commercial inventories. It will not be possible to determine what proportion of the total will be crude or products, or how much has actually been sold, before the end of the 30-day release period that started on June 27. The volume matches the allocation as a part of the IEA release programme. Trade ministry officials have said that it is up to oil refiners and importers to decide which commercial reserves to draw down, crude or products, even though the government would prefer an all-products release because it would have an immediate impact on markets.
POLAND Poland's allocation as part of the IEA release programme is 960,000 barrels of crude oil and oil products. Poland will release about 130,000 tonnes of fuel reserves, mostly gasoline and diesel with small volumes of crude oil, the Economy Ministry said. Polish refiners PKN Orlen and Lotos have to keep fuel stocks equal to 76 days of Polish demand as their strategic reserves. It will be up to them how to sell it, the economy ministry said. They will lower their storage reserves through regular sales.
TABLE-Oil to be made available under IEA release plan

LONDON, July 11 (Reuters) - The International Energy Agency on June 23 announced that it would release 60 million barrels of oil into the market. Below is an updated breakdown of how much individual countries are releasing and the proportion of crude and oil products. * The breakdown in crude and product has been estimated; overall stockholding obligations on industry, which include both crude and refined products, have been lowered in these countries. Source: International Energy Agency.
Total United States 30,640 Japan South Korea Total IEA Pacific Belgium France Germany Italy Netherlands Poland Spain Turkey United Kingdom Total IEA Europe Total IEA 59,833 797 3,242 2,770 2,524 1,173 959 2,274 1,071 3,000 17,811 7,915 3,467 11,382
Public 30,640 3,467 3,467
Crude Industry Oiil 7,915 7,915 30,640 3,958* 1,998 5,956
Refined Product 3,957* 1,469 5,426
Of which: Gasoline 300 300
diesel 1,169 1,169
Residual fuel Jet/kero oil -
95 2,770 1,173 4,038 38,145
702 3,242 2,524 959 2,274 1,071 3,000 13,773 21,688
1,620 1,023 310 600* 3,553 40,149
797 3,242 1,150 2,524 150 650 2,274 1,071 2,400* 14,258 19,684
43 476 500 1,183 139 331 176 2,848 3,148
654 2,375 650 373 150 510 1,799 895 7,407 8,576
6 64 968 144 1,181 1,181
95 327 422 422
Dutch seen selling full IEA oil release volume

By Ivana Sekularac AMSTERDAM, July 7 (Reuters) - The Netherlands became the first European country to offer its entire volume of oil and oil products as part of the IEA emergency release plan, and Dutch officials said they were likely to sell the full volume.
Forties and Brent are light, sweet crude from North Sea, which match the quality of crude oil that the IEA intended to release from member countries' stocks. The initial allocation from the IEA showed the Dutch release would be crude oil only, but the tender included diesel. Europe has a structural supply shortage of diesel.
The U.S. government's tender to sell light sweet crude from On June 23, the IEA announced plans for its member counits strategic oil reserves was also oversubscribed. tries to release 60 million barrels of oil and oil products from strategic reserves to cover the lost oil supply from Libya and to Stock releases in other European countries have been slow. Germany has sold about 63 percent of its allocated volume, cool prices. more than half of which was heavy crude. But it has not deOther European countries have released only part of their alcided whether to sell the remainder. located volumes. France has extended the period in which oil companies can The Dutch government offered 600,000 barrels of condenfree their stocks due partly to the slow progress of the release. sate and Forties crude directly to refineries on Thursday, on The UK government and UK-based oil companies have not top of 600,000 barrels of Brent crude and diesel it tendered provided any data regarding the released volume. The govlast week, officials said on Thursday. ernment said Britain has no intention of extending the release "This totals 1.2 million barrels," said Ted Van Dam Merrett, period. managing director of the Dutch COVA stockpiling agency. One physical oil trader said the Netherlands had a geographiThe government has already sold 300,000 barrels of conden- cal advantage as Europe's oil trading hub. sate and 150,000 barrels of Forties from Thursday's offer, Van "Look at the countries releasing the stock. They are not main Dam said. He declined to provide details on the remaining trading hubs," the trader said. 150,000 barrels pending final sale. Van Dam also said that last week's tender, which closed on Thursday at 11 a.m. (0900 GMT), resulted in the sale of 450,000 barrels of crude. A tender for the remainder -150,000 barrels of diesel -- will be reissued because of technical difficulties, he added.
Former French bank Societe Generale's Chief Executive Daniel Bouton (L), Lord Levene of Portsoken (C), Chairman of Lloyd's, and Claude Mandil (R), former Executive Director of International Energy Agency, attend the annual shareholder meeting of French oil company Total in Paris May 13, 2011. REUTERS/Jacky Naegelen
Oil will hit $150 in U.S. despite IEA -Guild

By Ikuko Kurahone LONDON, July 6 (Reuters) - The price of physical crude oil will hit $150 a barrel this year in the United States due to unrest in North Africa and the Middle East, despite the emergency oil stock release coordinated by the International Energy Agency (IEA), a U.S. fund manager said. Monty Guild, the chief executive of Guild Investment Management, said the IEA's move did not change oil's fundamentals. "Our opinion continues to be oil prices will reach $150 barrels this year due to the fighting near Saudi Arabia," Guild told Reuters in a telephone interview. He was referring to escalating violence in countries such as Syria and Yemen. These countries are very small producers but the market has been concerned about the spillover of the unrest to Saudi Arabia, the world's top oil exporter. North African producer Libya's oil supply has been disrupted since February because of its continuing civil war. Last month, the IEA, advisor for 28 industrialised nations on energy policy, announced that member countries would release 60 million barrels of crude oil and refined oil products to cover the lost oil supply from Libya and to pull down high prices. But international U.S. crude oil and ICE Brent crude futures have risen to the levels above where they were before the IEA announcement, after the sharp fall in the initial reaction to it. "It has changed nothing. It is purely political," Guild said. His oil price forecast refers to the average price to buy physical crude oil in the United States. Physical crude oil prices are $12-$15 per barrel higher than U.S. crude oil futures depending on grades of oil and the geographical locations, he said. U.S. crude futures were trading $96.93 a barrel by 1546 GMT on Wednesday.
Guild also said Saudi Arabia has surplus capacity to boost output volume when supply is tight but the quality of Saudi oil might limit its reach in the market. "Their oil is sour and very heavy that is very expensive to refine. Therefore the prices they are offering are not good prices," he said. "Prices are not attractive because cost of transporting and refining the oil they are producing are so high, so they are not offering any bargain." Guild Investment Management, based in Los Angeles, California, has about $150 million of assess under managements for selected clients. Its portfolio includes equities, foreign currencies, gold and some precious metals mostly through exchange traded funds (ETFs). The fund currently has an approximate 25 percent allocation to the global oil and energy sector. It has expanded its equity portfolio again to agriculture and related stocks, such as fertiliser, and Asian emerging markets such as India and Malaysia, after exiting these assets in March to focus on energy and commodities. Its current holdings include Brigham Exploration Co., Deethree Exploration LTD , Teucrium Corn Fund , SPDR Gold Trust, ETFS Gold Trust and others. Gold and agricultural commodities will continue to rise, Guild said, as many countries, such as China and Russia, will increase their holding in gold in their national portfolio. Food prices will be supported due to expected growth in demand from India and China, he said. He also has a view that U.S. Federal Reserve's second round of quantitative easing, or QE2, did little to boost actual economy. The programme ended in June. "To many observers it appears that all QE2 did was run up asset prices of gold, oil, stocks, and some other commodities," he said.
A petrol tanker leaves an EPPCO gas station in Dubai June 23, 2011. The UAE is the world's third largest oil exporter, now pumping 2.5 million barrels per day, and its petrol consumption is estimated to be around five million litres per day. To match feature EMIRATES-FUEL/SHORTAGE REUTERS/Jumana El Heloueh
IEA sees sizeable take-up of oil release

By Claire Milhench and Alex Lawler LONDON, July 4 (Reuters) - The International Energy Agency said on Monday it hoped a very sizeable portion of its oil stock release will be taken up by the market and the move was already adding to supplies of light, sweet crude. The IEA, adviser to 28 industrialised countries, on June 23 said it would release 60 million barrels of oil from strategic inventories to fill the gap in supplies left by the disruption to Libya's output. "We've had a fairly successful apparent level of uptake for the SPR release in the U.S.," said David Fyfe, head of the IEA's Oil Industry and Markets Division, on a conference call for journalists. "We would hope a very sizeable proportion of this will be taken up." The United States sold more than 30 million barrels of crude from the Strategic Petroleum Reserve (SPR), all of the oil on offer, the Department of Energy said on Friday. But demand has proved lacklustre for sales in some IEA countries, such as Germany. Other countries such as the UK are making supplies available by reducing the obligation to hold stocks rather than direct sales of stored oil. Germany has sold 63 percent of the total 4.2 million barrels of crude and oil products it put up for sale, German state stockpiling agency EBV said on Monday. An EBV spokesman described the level of interest in the sale as "restrained." PICTURE 'IMPROVES' FOR LIGHT CRUDE Oil prices at first fell sharply as a result of the IEA's action but were trading around $112 a barrel on Monday, close to where they were before the IEA announced the move. Asked to judge the success or failure of the move, IEA officials on the conference call said the stocks release had had boosted supplies of high-quality crude that have been reduced by the conflict in Libya. "There are some significant factors beyond the absolute value of the barrel, which is the improvement in refining margins that we've seen and a less tight differential between light and heavy crude, which clearly shows that (for) light, sweet crude - for which the Libyan disruption was a key problem -- we have seen a clear improvement," said Didier Houssin, Director of Energy Markets and Security at the IEA. Fyfe added that the release of light, sweet crude in the United States could reduce the need for U.S. imports, meaning more crude could head to Asia, which is driving the increase in global oil demand. The stocks release is only the third in the IEA's history. Its last such move was in 2005 in the wake of Hurricane Katrina's disruption to U.S. supplies. "The experience previously from Hurricane Katrina was good. The initial signs from the U.S. this time around are looking good," Fyfe said. Other countries are preparing to offer their share of the 60 million barrels.
The IEA said on the call Turkey's contribution of about 1 million barrels would be sold by Turkish refiner Tupras and the oil will be available probably later in the week.
Goldman: 2011 Brent to fall $6-$8/bbl on IEA clarity

July 1 (Reuters) - Goldman Sachs said on Friday that 2011 Brent crude oil prices were likely to fall by $6-$8 per barrel, from an earlier estimate of $10-12/bbl. It had become clear that the impact of the International Energy Agency's 60-million-barrel oil release would be much smaller than the initial announcement suggested, the investment bank said. Goldman forecast the prices of 2012 Brent to fall by $3-$5/ bbl, from an earlier estimate of $5-$7/bbl. "The release could potentially lower our near-term Brent crude oil price target from $117/bbl to $109-111/bbl and our 2012 Brent crude oil price forecast from $130/bbl to $125-127/ bbl," Goldman said.
The incoming International Energy Agency Executive Director Nobuo Tanaka listens to a question during a news conference at the Foreign Correspondents' Club of Japan in Tokyo January 5, 2007. Japan's Tanaka said on Monday his challenges would include working closely with non-IEA-member countries such as China and India about the use of emergency crude oil stocks. REUTERS/Toru Hanai
IEA move won't hit crude market long-termEcuador

By Santiago Silva QUITO, June 30 (Reuters) - The oil market will not be affected in the long term by the International Energy Agency's release of strategic oil reserves, Ecuador's oil minister Wilson Pastor said on Thursday. "These strategic reserves can be compared to a pail of water in an Olympic pool," he told reporters. "It's not going to affect the market long term." He said industrialized nations sought to benefit from the failure to reach an agreement at the June 8 meeting of the Organization of the Petroleum Exporting Countries, of which Ecuador is the smallest producing member. "The last meeting showed a weakness in OPEC," he said. "Industrialized nations took advantage of this situation to release strategic reserves." Pastor added that the price of Ecuador crude "should move" in a range of between $80 and $100 a barrel.
On Monday, OPEC's Secretary General Abdullah al-Badri said the IEA order to release emergency oil stocks should be halted immediately. Last week, the 28-member IEA shocked the oil markets when it announced a plan to release 60 million barrels from emergency stockpiles over an initial 30 days to fill a gap in supplies. Investors continued to keep an eye on the progress of reserve oil stocks sales by the IEA member nations to see how well the market can soak up the supply. Brent oil prices, which plunged on news of the IEA move, are on track for a 6 percent gain this week, after two straight weekly losses. The IEA could decide by mid-July whether to release more oil from strategic oil reserves, but does not see the program extending for longer than a month or two, an official said earlier this week. The member countries of the Paris-based IEA, formed in 1974 to protects consumers' interests following the Arab oil embargo, hold emergency stockpiles to be used in the event of an actual or potentially severe oil supply disruption.
An employee fills the tank of a car at a petrol station in Seoul June 27, 2011. South Korea, as a member of the 28-nation IEA, will release 3.46 million barrels oil stocks over 30 days after a meeting with local refiners later on Monday. REUTERS/Jo Yong-Hak
Oil stock release looks chaotic, could backfire

By Christopher Johnson LONDON, June 30 (Reuters) - Just a week after the West's energy watchdog announced the release of millions of barrels of oil, forcing a drop in the oil market, prices are almost back to where they were and analysts say the policy is chaotic and could backfire. Far from depressing prices and rescuing a fragile economic recovery in the industrialised world, the release of strategic oil stocks is piling more misery on refiners, and has raised expectations of increased supply that may not be realised. The release by the International Energy Agency (IEA) is badly coordinated, oil traders say, and may not be completed. "In a couple of days the IEA plans for release of 60 million barrels of oil have moved from looking well planned and thought through, to ill-conceived and poorly organised, except perhaps in the United States," said Philip Wiper, director of brokers PVM Oil Associates. IEA officials were not immediately available for comment.
Analysts say many of the IEA stocks are unlikely to be sold unless they are priced well below the market. "I see no need for sales in the United States as supplies are not tight there at all. I wouldn't be surprised if the 30 million barrels won't be retrieved completely," said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt. Uncertainty over the release of oil products into the market could depress refining margins and cut supplies to customers in some regions, Eagles said. "Refining margin volatility caused by the lack of clarity on the IEA release volumes risks reducing, rather than supplementing, European product supplies," he said. Wiper at PVM says the full amount of 60 million barrels is "certain not to appear in the market". This would be reassuring for Abdullah al-Badri, secretary general of the Organization of the Petroleum Exporting Countries, who on Monday demanded an immediate halt to the IEA action designed to force down crude prices. "It's perhaps not so surprising that we've turned a full price circle. It's not surprising either that OPEC Secretary General al-Badri seems much more relaxed."
Oil prices tumbled immediately after the announcement of the stocks release on June 23 as funds sold, forcing North Sea Brent crude futures down almost $7 per barrel on the first day and down to a low of just above $102 by Monday. Four days later, prices have snapped back above $113 and are still rising Traders abuzz at timing of US-led oil talks, price with traders saying the "IEA effect" has been almost comswings pletely absorbed and discounted by the market. By David Sheppard and Joshua Schneyer Strategists and analysts say one key problem with the IEA NEW YORK, June 30 (Reuters) - One of the largest oil price release is that it is being disbursed in various different ways routs in history came in early May as the United States led and by many different organisations. Some of these are very discussions with top Middle East producers to intervene in the well organised, others are not. market. That timing, and a subsequent price plunge this In the United States, the Department of Energy (DOE) has month, now have many traders wondering whether word of already started a tender process to sell 30 million barrels of the talks leaked out to key players, according to a dozen tradcrude from the Strategic Petroleum Reserve and details of the ers spoken to by Reuters. locations, timing and qualities included were clear almost As a detailed timeline emerges of the International Energy immediately after the first announcement. Agency's two-month march toward the June 23 announceTraders say the disbursement of these crudes, mainly light ment it was releasing strategic petroleum reserves, one of the and low sulphur grades well liked by the market, is likely to largest interventions ever by Western governments, traders have the desired effect on the market, dampening crude are parsing the days of huge price moves leading up to the prices, especially if the DOE sells the oil aggressively. news. Graphic package on reserves: ( http://r.reuters.com/xew32s ) "NO OBLIGATION" Arrangements in many of the other 27 IEA member states are quite different. In Europe, many of the oil stocks released will be oil products, some of which are already abundant. "Out of the remaining 30.6 million barrels, we see less than 8 million barrels being pushed into the market,"said Lawrence Eagles, global head of oil research at JP Morgan and a former IEA official. "The method of sale, and the lack of guidance on refilling, work against the barrels being used." Traders and endusers are not obliged to buy the oil being released from stocks, and many do not expect to. British firms holding emergency oil stocks have no obligation to tender or release them, a spokesman for the Department of Energy and Climate Change (DECC) said on Thursday, indicating the oil may never leave storage tanks. "They have an obligation now (to hold stocks) and we are releasing them as part of that obligation. If they don't sell it, they don't sell it," said DECC spokesman Cameron Ramos. By the first week of May, U.S. President Barack Obama was seriously considering tapping strategic reserves, according to an administration official. On May 6, the president called King Abdullah of Saudi Arabia and Kuwaiti Emir Sheikh Sabah alAhmad to talk about the situation, an Obama administration official said. There is no evidence that U.S., IEA or Arab officials knowingly leaked the plans. A U.S. administration official told Reuters last week that the Saudis were grateful that a visit to the kingdom by senior U.S. officials had been kept out of the press. World oil prices surged by 31 percent in the first four months of this year, endangering the global economic recovery, as the civil war in Libya cut its exports from the market, pushing the European benchmark Brent price above $125 a barrel. In the same week Obama contacted the Middle Eastern leaders, oil markets had their most volatile session in years, crashing by almost 10 percent in a matter of hours on May 5, a move many traders and analysts have struggled to explain.
Another gut-wrenching drop came in mid-June, well before the reserve releases were made public on June 23. Brent oil prices also fell sharply in the hours just prior to the IEA announcement. While they continued to slide throughout Thursday, they have since rebounded back to the level they held one day before the official news and closed on Thursday around $112 a barrel. Philip Wiper of oil PVM in London wrote in notes to clients this week of the possibility the information had leaked to some market participants. "There are rumors that May 5th, the day oil prices fell $10 was the first day that Obama started to consult seriously on a plan to use the SPR in this way," wrote Wiper. Early signs high oil prices were hitting the global economy were one factor, traders said, while others linked it to recommendations by Goldman Sachs that prices could fall. But most traders could not pinpoint specific reasons for such a steep fall without any major news driving it. Graphic-timeline of IEA plan: ( http://r.reuters.com/fet42s ) Graphic-US strategic reserves ( http://r.reuters.com/cah48r ) WELL KEPT SECRET? After the early-May plunge, it would be another seven weeks before the IEA, the West's oil watchdog, would publicly unveil plans to release 60 million barrels of strategic reserves. Wiper said the public announcement still came as a surprise to "most at least".
lease reserves immediately after Libya's exports were cut in late February. WHO WAS IN THE LOOP? On June 15, oil prices plunged in high volume trading, in a move reminiscent of the May 5 crash. Traders again struggled to explain the move. On the same day, two reports caught traders' attention. Medley Global Advisors, a hedge fund consultant, distributed a report saying reserve holders were "seriously considering a release", according to sources who saw the report. Medley declined comment. Also that day, Reuters reported that in May and early June, U.S. and Saudi officials had secretly discussed a plan for the U.S. to release light, sweet oil from its Strategic Petroleum Reserve and then replenish the SPR with lower-quality, sour crude provided by Saudi Arabia. The U.S. would ship some of the SPR crude to Europe, where refineries were suffering most from cuts in Libyan supply. The swap plan was ultimately abandoned, in part because Riyadh was unwilling to discount the supplies of its sour crude, two people familiar with the plans told Reuters. After members of the Organization of the Petroleum Exporting Countries (OPEC) could not agree on a production increase at their meeting in early June, the Obama administration sprang into action, canvassing IEA members to see how much each could contribute to a release, sources said.
On June 17, Obama authorized a request for an IEA feasibility study, as did IEA members Britain, South Korea and Japan, Traders say that the sheer number of officials who would have according to people familiar with the matter. Meanwhile, the been consulted in various discussions - at IEA headquarters, in IEA also discussed its plans with other major economies inWashington, in other IEA member states and the Middle East cluding China, which is not a member, and Saudi Arabia, - nevertheless meant it would have been easy for word to slip which had announced a unilateral production increase after out. Talks had been under way since late April among the 28 failing to convince OPEC to act, said people familiar with the member nations of the agency and within its secretariat, said matter. one person familiar with the situation. On June 20 the United States contacted the IEA, requesting Didier Houssin, director of energy markets at the IEA, declined the agency prepare a plan to tap reserves for approval. The to comment on whether planning information leaked. The agency, primed to respond to emergencies like Hurricane White House referred queries to the U.S. Commodity Futures Katrina and Rita, responded June 21. The plan was then sent Trading Commission (CFTC). The CFTC declined to comment. to all 28 IEA member states, who were given 48 hours to respond. After a meeting of the IEA's governing board on May 19, the agency urged OPEC to increase production and hinted mem- Oil prices started falling in the hours immediately before the ber nations were prepared to use "all tools" at their disposal IEA made its plans public in an announcement from its headto help protect the global economy. quarters in Paris last Thursday (June 23) at 09:00 EDT (1400 GMT). On the same day, U.S. Interior Secretary Ken Salazar downplayed the possibility, telling reporters on Capitol Hill that The Wall Street Journal reported on Friday that the CFTC is tapping reserves was not seen as an effective way to control investigating what the paper called "suspicious" trading pump prices. "Looking back, I think it was not such a well kept ahead of the announcement. secret," said one trader at a major European trading house, In the week leading up to the announcement, hedge funds who asked not to be identified. slashed their bets on higher oil prices that they had built up as Like major inter-government interventions into currency or the crisis in Libya developed. Data from the CFTC and the UKdebt markets, a move of this scope is fraught with risk. Oil based ICE Exchange showed hedge funds cut back their long industry sources said it is not uncommon for U.S. officials at positions by as much as 40 percent over that week. the Departments of Energy and Treasury to discuss policy From early May, until the day of the announcement last scenarios with experts outside of government first. Thursday, the Brent crude oil dropped to around $114 a barrel The Rapidan Group, a consultancy run by former White House from above $125 a barrel. energy advisor Robert McNally, released a May 27 note to On the day of the official news, Brent oil prices fell and continclients predicting Washington would tap its reserves if OPEC ued the downward trend through Monday. But since then, oil did not act to cool prices at its June 8 meeting in Vienna. has rebounded sharply, gaining $10 to trade at $112 a barrel In an interview with Reuters, McNally said his prediction was on Thursday June 30. based largely on "reading the tea leaves" and public state(Continued on page 22) ments from the agency, even though it had chosen not to re-
GERMANY, ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF MAY SECOND OIL FOR YET RELEASE PASSES AGENCY TO OIL TO DECIDE ON OIL INTERNATIONAL RESERVESRELEASERELEASE TO RELEASE ENERGY OIL RESERVE RELEASE
JULY 2011 JUNE 2011 JUNE 2011
IEA may decide on new oil release by mid-July

MEXICO CITY, June 29 (Reuters) - The International Energy Agency could decide by mid-July whether to release more oil from the strategic oil reserves but does not see the program extending for longer than a month or two, an official said on Wednesday. The 28-member IEA shocked the oil markets last week when it announced a plan to release 60 million barrels from emergency stockpiles over an initial 30 days to fill the gap in supplies left by the disruption to Libya's output. The added oil will boost world supply by nearly 2.5 percent, or just less than Iraq produces. It was only the third such move in the agency's history, in a sign of deepening concern among Western leaders that high energy costs could further damage the global economy. Richard Jones, deputy executive director of the IEA, said the release would likely be temporary since demand is seen falling at the end of the year. "We do believe it could be temporary but we have to see how the market evolves. There could be other disruptions," Jones said at an event in Mexico City on clean energy technologies. A decision on whether to repeat the release after the 30-day time period is over could be made around the third week of July, he said.
"It will be up to our member countries. They could decide to continue it for a month or two. I don't see that we'll need to continue it for very long because we see demand declining in the fourth quarter." All 60 million barrels should be in the market by the end of 30 days, unless member countries have difficulty finding buyers, Jones said. "It may be possible, depending on what the market situation is, that even if they offer it for sale they won't get any bids," he said. OPEC, which has long feared consumer nations will use their stockpiles to undercut the cartel's sway over prices, initially said the release was unnecessary and the market was balanced. Oil prices tumbled after the announcement but have since recovered. "We didn't do it for price," Jones said. "We did it to make sure the market was supplied in the coming months and if the price stays steady that's good from our perspective because we saw that there was a real potential for a sharp price spike." Oil prices have risen 20 percent over the past year, and retail gasoline prices in the United States have hit $4 a gallon, a price that can force consumers to reduce driving or cut spending in other areas of their household budgets. Jones said restocking was not urgent and could wait until the conflict in Libya subsides, since the release only amounted to a small portion of member nations' existing inventories.
OPEC Secretary-General Abdullah El-Badri (R) talks to journalists before a panel discussion at the World Economic Forum in Vienna, June 9, 2011. The World Economic Forum on Europe and Central Asia takes place from June 8 to 9, 2011 in Vienna. REUTERS/Heinz-Peter Bader
IEA stock release wounds Europe's refiners

By Zaida Espana and Emma Farge LONDON, June 28 (Reuters) - European demand is too limp to absorb the 15 million barrels of fuels that the West's energy watchdog aims to release over the next month and whatever supplies are sold will deepen the refining industry's crisis. The release, meant to stop high energy prices from stifling economic growth, amounts to around 500,000 barrels per day (bpd) of extra supply. This is equivalent to the output of about three medium-size refineries, at a time when over a fifth of capacity is already idle due to waning demand and Asian competition. Scores of refineries in Europe are at risk of closure or up for sale as oil majors like Royal Dutch Shell and Total look to strip out the least profitable assets from their portfolios. Analysts and refiners have met the International Energy Agency's (IEA) decision to coordinate the release of 30 days' worth of oil product stocks in Europe with deep scepticism. Many expect a portion to remain trapped in tanks for lack of demand. The fuels that are released will drive prices down further this summer after a knee-jerk sell-off on Monday, traders said, easing consumer inflation fears but further eating into refiners' profitability. "The IEA data has nuked the market. It makes one wonder how they'll replace the stocks, seeing as they'll likely put half the European refining community out of business in the process," said a distillates trader with a trading house. The announcement knocked down European gasoline prices by around 7 percent and weighed on distillate prices. "The 15 million barrels of products should mean that refinery margins get pummelled and runs are cut, seeing as demand is already poor," said a European oil trader with a bank.
SUPPLY MISMATCH Industry analysts and traders were dubious about the decision to release such a high portion of oil products instead of the light, sweet crude oil the IEA has said is required to replace Libyan exports lost due to conflict in the OPEC producer. Over half of the fuels or around 8 million barrels, will be distillates like diesel even though commercial stocks in the storage hub of Amsterdam-Rotterdam-Antwerp are already near record highs. The release of refined products in Europe is also in sharp contrast with the United States , where all of the emergency oil stocks are crude -- a decision likely to be welcomed by refiners, as it will make oil cheaper to process . "The latest development shows once again that U.S. refiners have much more political clout than their European counterparts. While European markets have been swamped with extra product supplies at a time when a quarter of refining capacity is idle, U.S. refiners are getting more discounted crude," said David Wech at JBC Energy. European run rates are already hovering near post-recession lows at 79 percent of capacity and at least 10 percentage points below U.S. levels -- largely because of the hefty premium of European benchmark Brent crude to U.S. futures . While it will be mandatory under the IEA measures for holders of commercial oil products stocks to offer supplies for sale there is no guarantee that buyers will come forward. Wech predicted only around 350,000 bpd of the planned 500,000 bpd would be released this summer . In the case of Britain, for example, obligations backed by the IEA for stockholders to keep enough supplies for a minimum period will simply be lowered, which may not result in an immediate sale of surplus volumes, traders said.
Traders said the marketing and pricing mechanisms for the sale, which are currently unclear, will be key in determining the ultimate take-up. "You have a notional amount of 60 million barrels that is made available, and what ultimately will be taken up by the market will depend on the marketing mechanisms chosen to make that oil available: so essentially the prices at which the national agencies sell that oil", BNP Paribas' head of commodity markets strategy Harry Tchilinguirian said. STORAGE PLAY Traders said that some savvy traders could benefit from the extra supply injection of distillates like diesel by exploiting a deeper contango in the ICE gasoil futures curve. European ICE gasoil futures are currently in a $4 contango -a structure where the front month contract is below those further in the future -- and some traders expect the stock release could steepen this structure and make storage more lucrative. But as with the multi-billion dollar storage trade that emerged due to oversupplies after the 2008 recession, the refined oil may simply be transferred from one tank to another.
Urals Blend this year and $120 per barrel next year. It was trading at near $106 at 1528 GMT. The fall in oil prices also prompted Russia's anti-monpoly board to warn petrol retailers to lower prices at the pump or face investigation. Rising prices are often cited as the top worry among voters ahead of parliamentary elections later this year and a presidential poll in March next year. "Oil prices are falling on world markets. We warned oil companies today that if they do not mark their prices down we will open up new investigations," said the head of the antimonopoly service Igor Artemyev said on Tuesday. Prime Minister Vladimir Putin ordered oil firms in February to cap prices, causing companies to boost exports in order to maintain profit margins. Prohibitive export tariffs slowed gasoline exports in May, Energy Ministry data showed on Tuesday.
Kuwait keeps up oil output despite IEA move

By Amena Bakr
RIYADH, June 28 (Reuters) - Kuwait has kept oil production steady at around 2.6 million barrels per day (bpd) since the International Energy Agency (IEA) said it would release oil "People will just play the contango with the barrels. The fact is stocks last week, a Gulf OPEC delegate said on Tuesday. there's no demand," said a trader with a European refiner. But traders said owners of storage may be punished by a steep contango since they will be forced to buy back their own oil at a higher price later to replenish stocks. Another possible scenario is the stock release boosts exports, but traders said arbitrage economics for diesel for example are not currently profitable.
Russia says oil price drop short-term after IEA move

By Gleb Bryanski MOSCOW, June 28 (Reuters) - Russia, the world's largest energy producer, said on Tuesday a fall in oil prices after an emergency move by a consumer agency will be temporary as producers lack extra capacity to boost output at existing fields. International benchmark Brent crude lost 6 percent of its value after member nations of the Paris-based International Energy Agency (IEA) agreed last week to release oil from emergency stockpiles for the third time in history. "I do not think this will be a long-term trend," Deputy Prime Minister Igor Sechin, who oversees Russia's oil and gas sectors, told reporters in Moscow. Sechin, one of Prime Minister Vladimir Putin's closest allies, said he saw little opportunity to increase overall global oil production and added a new oil pricing mechanism was needed to make the tapping of new oil fields was profitable. "It seems to us that there are no major opportunities to increase the level of production at the current fields," Sechin said, adding oil producers and consumers must try to balance their interests. Higher oil prices this year have boosted state revenue forecasts by around $51 billion. The Finance Ministry says Russia's budget would only be balanced at $115 per barrel of Russia's
Head of Iran's OPEC delegation and OPEC president Mohammad Aliabadi talks to journalists at the beginning of an OPEC meeting in Vienna, June 8, 2011. The world oil market is well supplied, OPEC's president said in a speech at the opening of the group's meeting on Wednesday. REUTERS/Heinz-Peter Bader
The IEA group of industrialised nations announced last Thursday it would release about 2 million bpd of oil from emergency stocks over 30 days to boost supply and drive down crude prices. But Gulf oil exporters say they will likely maintain their production at pre IEA stock release levels because demand for crude in other consuming countries is so strong. "Kuwait is now producing 2.6 million bpd, so it is not really impacted by the IEA stocks," the Gulf delegate told Reuters on Tuesday. The surprise move by major consuming countries to drive down oil prices in a bid to boost economic growth was condemned by OPEC producers as unecessary, with Kuwait and Saudi Arabia arguing they have plenty of spare capacity available to meet any demand. Oil exporter group OPEC failed in early June to agree an increase in output which its Gulf Arab members and the IEA had hoped would help maintain long term demand for oil by helping sustain economic growth. Leading exporter Saudi Arabia, which holds most of OPEC'S spare capacity, said it would produce as much oil as needed after the talks in Vienna collapsed on June 8. Kuwait's oil minister said on June 20 the world's fourth largest oil exporter was producing an average of 2.55-2.70 million bpd of crude, compared to a Reuters survey which pegged average Kuwaiti output in May at 2.44 million bpd.
"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.
IEA's move meant to send a shock wave to the market

By Muriel Boselli PARIS, June 28 (Reuters) - A high level of emergency stocks enabled industrialised nations to divert their purpose to support a fragile economic recovery rather than to handle severe oil supply disruptions, a diplomatic source said.
IEA says oil release a stop gap solution

LONDON, June 28 (Reuters) - 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. PRE-EMPTIVE IEA MOVE 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."
A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011. South Korea, as a member of the 28-nation IEA, will release 3.46 million barrels oil stocks over 30 days after a meeting with local refiners later on Monday. REUTERS/Jo Yong-Hak
Consuming nations agreed last week to release oil from emergency stockpiles for only the third time in history. The news took oil markets by storm, knocking around six percent off international benchmark Brent crude and providing some relief for a fragile world economy. "Our analysis, which was convergent between us and the Americans, was that the traditional tools were not sufficient and that we needed to create a surprise effect in the markets," the European diplomatic source added. Discussions over the supply release began in earnest in May, but it was only approved by all 28 of the International Energy Agency's 28 members by midday European time on Thursday. Only three hours later at 1300 GMT, a news conference was called in Paris, where IEA Executive Director Nobuo Tanaka announced the 60 million-barrel release. That is less than 4 percent of the total of emergency stocks held by the 28 countries of the IEA. IEA's executive director Nobuo Tanaka said on Tuesday the release was a temporary measure to fill a supply gap from missing Libyan output before extra Saudi Arabian production emerged. "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." The source said the stocks release amounted to a fundamental shift at least on this occasion and that had only been possible because stock levels were high. "It's a tool which has been designed to respond to oil disruption. And it's not the case this time," the source added. PHILOSOPHICAL REFLEXION Discussions before the release decision had been "a philoso-
phical reflexion on the use of strategic stocks". "To be clear we did not divert strategic stocks from their initial aim. They still exist. We had margins of manoeuvre for this extraordinary operation," he added. The IEA, founded in 1974 following the Arab oil embargo, has only previously released emergency reserves in 1991 at the time of the first Gulf War and in 2005 after Hurricane Katrina ripped through oil infrastructure in the U.S. Gulf. Some analysts have said the impact this time could be muted because of the strength of Asian demand. Oil markets rose on Tuesday as an agreement by France to roll over holdings of mature Greek debt boosted appetite for riskier assets like commodities and helped lift the euro against the dollar. Some of the sell-off since the April high was driven by expectations of reduced demand in the United States and other Western nations where fragile economies are ill-placed to cope with the strain of expensive oil. The source confirmed comment from U.S. officials that the U.S.-led plan gained real momentum after a failed OPEC meeting earlier this month. "The proposal came from the U.S. around the end of May," he said. "Discussions started then but there was no decision taken at that point because we had to see what would happen from the producers' end with the OPEC meeting." The IEA placed heavy pressure on the Organization of the Petroleum Exporting Countries and threatened it would use "all the tools" at its disposal if it did not raise production. OPEC failed to reach agreement after seven members, including Iran, opposed a Saudi proposal to pump more oil, although Saudi Arabia has said it will produce whatever the market needs in any case.
Police detain a supporter of imprisoned Russian oil tycoon Mikhail Khodorkovsky during a gathering in central Moscow June 26, 2011. Participants held balloons with Khodorkovsky's portrait and distributed leaflets on the occasion of his birthday. REUTERS/Tatyana Makeyeva
GERMANY, ITALYAMID IEA HALFWAYON RELEASE ACHIEVED DEMAND IEA TOGLITTERSON INVESTOR,RESERVEWEAK DOLLAR BALI MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF FURTHEROPPOSE OIL RELEASE YET RELEASE DEBATE TO FEED FOR OIL NO HOVER OIL HIGHS BOOMING ON SEVERE POWER CHINA SHINES MAY ECONOMIC GAS SPECIALTO DECIDE IN RACERELEASEMARKIEA OIL RELEASE COAL RELEASE PASSES ENERGYWOES NOW ASIA - THE NEAR ASIA'S WOES DEMAND GOLD, GRAPPLESCHINAS OIL ANDENERGY NEEDS INENERGY MAY 2011 SILVERSILVERON OIL FROM RESERVES GOLD THAN HALF WITHSECONDANOTHERSHORTAGES
POLL-IEA caps oil prices this year, 2012 spike looms

By Antonita Devotta and Florence Tan NEW YORK/SINGAPORE, June 27 (Reuters) - The industrialized world has likely capped oil prices for the rest of the year by releasing emergency reserves, a Reuters poll found, suggesting they have bought the world economy more time to mend. While most analysts have not formally revised their annual forecasts, a Reuters poll of 30 analysts and traders showed all but one believe Brent crude oil will remain below $120 a barrel through the end of the year after consumer nations released emergency reserves for the third time ever. Over 80 percent of the 30 respondents said Brent crude oil would remain below $110 a barrel over the next month, suggesting many -- like JP Morgan -- are significantly scaling back their short-term views. In May, a separate Reuters poll of official forecasts showed $110 for the third quarter. Analysts also see little scope for appreciation later in the year, even as the impact of the 60-million-barrel inventory injection fades, and demand picks up with a recovering economy and the onset of winter in the northern hemisphere. "Adding 60 million barrels of oil to the market could push down near-term Brent crude oil prices by $10 to $12 a barrel," said analyst David Greely at Goldman Sachs. "We would expect the release to have less of an impact on prices further out the curve." Over 85 percent expect Brent to remain below $120 a barrel by December, less than its peak this year in April; nearly a third of those polled see it below $100 a barrel.
Even so, analysts do not expect members of the International Energy Agency to find willing buyers for all the oil: most think less than 75 percent of the 60 million barrels marked for release will eventually be sold. Besides, the respite from higher prices is not expected to last. More than half said prices would come roaring back in 2012, averaging between $110 and $130 a barrel over the whole year as the IEA's plan is seen as just a short-term balm against the pace of demand growth outpacing supplies. That's even higher than the forecast $107 in the previous May poll. "This is price bearish for crude oil today and in the immediate term," said Jason Schenker, president of Prestige Economics in Austin, Texas. "(But) the fact that the IEA had to go to these lengths in the second year of an expanding business cycle says something very bullish about crude oil prices in the medium and long-term." Spreadsheet of results: ( http://r.reuters.com/nuz32s ) More than 55 percent of the analysts polled said Brent would average between $110 and $130 a barrel over the course of 2012. So far in 2011, Brent has averaged around $111 a barrel threatening to slow a fragile global economy. The release is expected to act as a catalyst for stronger growth next year. "We would start to become a cautious buyer of Brent below $100 and would become a more aggressive buyer as Brent approaches $90," said Michael Wittner, a former analyst at the IEA now at Societe Generale in New York. Wittner said hedging would pick up from large consumers like airlines and industrial users once prices dropped below $100 a barrel, while investor bargain hunting would also help stabilise prices eventually.
International Energy Agency (IEA) Executive Director Nobuo Tanaka attends a meeting of the CEOs of global energy companies called "New paths to energy security" at the St. Petersburg International Economic Forum, June 17, 2011. Tanaka said on Friday he would like Russia and other emerging economies to join the group, which is responsible for energy security in the developed world. REUTERS/Alexander Demianchuk
WHEN THE REBOUND COMES With the possibility remaining high that Libyan crude will not resurface in 2012, analysts still anticipate a tight market and remain bullish on prices in the coming year. About 60 percent of the analysts and traders polled expect the price of a barrel of crude to bounce back above $110, while about 10 percent expect prices between $120 and $130 a barrel. "The bottom line is that this release provides a welcome short-term economic stimulus at a time when the world economy could do with a boost," said Lawrence Eagles at J.P. Morgan in New York, another former IEA analyst. "Should the Libyan disruption turn into a chronic outage, the IEA will at some point have to wean consumers off the reserve release." The IEA has indicated it may extend the crude sales for a second month if demand remains adequate and prices do not fall sharply. While the agency had launched a new period in its history by showing willingness to use its reserves as a "weapon" in the face of higher prices, analysts say the IEA cannot use its stockpiles to keep prices down indefinitely. Some also said the agency has risked provoking major producers like Saudi Arabia, though reports suggest OPEC's largest exporter was consulted by the United States ahead of the announcement . Analysts at Barclays Capital said the IEA's decision "sends the incorrect signal" to major producers, with whom the agency has enjoyed better relations in recent years. "The net result will likely be lower Saudi volumes by the end of 2011, and once the temporary stock release is over, the flow of Saudi Arabian crude could dry up, tightening up balances by year-end and into 2012," Barcap analyst Paul Horsnell said.
There was also something of a disguised threat in its view that should OPEC fail to oblige, "we are prepared to consider using all tools that are at the disposal of IEA member countries." However, OPEC's meeting broke up without any consensus or decision. This left the IEA hostage to its own fortune, instigating SPR release decision. Market participants see this as bearish for prices in the short term and potentially for light-heavy differentials, with greater availability of the former. While we do not disagree with these short-term effects, the ultimate implications of the stock release are far greater and longer term, threatening to jeopardise consumer-producer relationships in the oil market and placing upward pressure on prices by year-end and into next year. While the IEA is correct to worry about global balances, particularly given the Libyan outage and only very partial replacement of Libyan volumes, the use of SPR, particularly when Saudi Arabia has restated its commitment to supply customers with the crude it needs, sends the wrong signal, in our view. The net result will likely be lower Saudi volumes by the end of 2011, and once the temporary stock release is over, the flow of Saudi Arabian crude could dry up, tightening up balances by year-end and into 2012. Deutsche Bank The IEA sees their release as an effort to break the market logjam, while giving the Saudis time to gear up output and maybe buying a bit of time to see if the opposition forces in Libya can ship some oil. It is a risky move in our view since it is a mostly short-term fix to a problem with many long-term components.
Analyst reaction to IEA releasing oil reserves

June 24 (Reuters) - Oil consumer nations on Thursday announced a surprise release from strategic government petroleum stockpiles in a bid to push down fuel prices and underpin the global economy. The 28-member International Energy Agency said it would release 60 million barrels a day over an initial 30 days to fill the gap created by the disruption to Libya's output. The United States will provide half the volumes from its huge 727-million barrel crude reserve, with Europe supplying 30 percent in crude and refined products and the rest from Pacific OECD nations. Oil prices tumbled more than 6 percent on Thursday after the world's consumer nations banded together to aid the global economy by releasing emergency oil reserves for the third time in its 37-year history. Here is a list of brokerages and their comments on the IEA move. WHAT THEY SAY ABOUT THE IEA DECISION Barclays Capital The IEA's decision comes primarily as a result of statements issued prior to the OPEC meeting, which called for the producer group to increase production to meet the rising call on its crude in Q3.
Vehicles queue for petrol at an Emarat gas station in Dubai June 23, 2011. The UAE is the world's third largest oil exporter, now pumping 2.5 million barrels per day, and its petrol consumption is estimated to be around five million litres per day. REUTERS/Jumana El Heloueh
In our models, OPEC output must grow sharply again in 2012.In our view, the IEA may be tempted to extend the draw for an additional 30 days, but at some point we expect that fundamentally tighter markets will force the IEA to surrender to higher prices. Cameron Hanover The release of barrels from the SPR and IEA is not really about supply, in our mind. It is more about market psychology and trying to shake out investors who bought oil as an asset. It is about sending messages to investors and possibly to OPEC members like Iran and Venezuela. It is not enough oil to tip the long- term supply-demand balance, but it could have been enough to change the psychology.
Gain Capital The IEA's decision is likely to keep pressure on crude oil prices into the end of the first half of 2011. However, Thursday's announcement may have limited downside impact on oil prices in the medium to longer term picture. Overall, prospects of growth have (MENA unrest, China 'hard landing' fears,decelerating U.S. economic recovery, & EZ sovereign debt concerns) are likely to be the wild cards that determine medium to longer term oil price direction.
Any abatement in growth risks would support both WTI and Brent while amplification or compounding growth risks would weigh on crude oil prices. Accordingly, we think near term crude oil prices may see further downside corrections towards $101/bbl in Brent & $85.00/bbl in WTI on the back of We will not know if this was a brilliant move or a mistake until we see what happens with prices for more than a day. It the IEA's supply injection, the ongoing Greek debate, and the could potentially breathe some life into the economy, but we recent stream of negative U.S. data surprises. However, we think a still firm underlying oil market structure may see both need to see that, as well. Bulls countered that the Saudis crude oil benchmarks resume their primary uptrends. must really be much closer to exhausting their spare capacity than is commonly believed for them to approve of this move. Goldman Sachs They say we are squandering our vital reserve. Dire bears said that the economy must be in much worse condition than anyone knows for the government to turn to the IEA and SPR to agree to release oil together. CommerzBank The IEA cited short supply due to Libyan supply outages as its reason for the decision. As this is not a new phenomenon, though, the timing of the measure suggests it is firstly a reaction to OPEC's lack of willingness to increase production quotas and, secondly, the release of reserves probably aims at calming the oil market and oil prices in the near term. As strategic reserves are merely meant to ease physical bottlenecks, this would contradict with its actual purpose. In the medium term, the IEA's decision could prove to be a boomerang, as it is now questionable whether Saudi Arabia feels tied to its pledge to boost its output in the short term to 10 million barrels a day. This release will ease the market initially though. BofA Merril Lower oil prices will bring immediate relief to consumers, but to us this IEA release comes too little, too late. In fact, global oil demand has been on a pretty sharp decelerating path across the OECD region since growth peaked in 4Q10, and many EMs have also started to reduce their oil intake. In this third release (Strategic Petroleum Reserves), front-tothree month Brent timespreads have already come down by $0.73/bbl, while the WTI- Brent spread has seen a major reversal. Looking into the second half of the year, we believe Brent term structure could weaken further and maintain our average forecast of $102/bbl. Given the situation in the MENA, the tails around our baseline are very large and we present two additional scenarios. Under our upside risk scenario (30% probability), Brent prices could average this year between $125/bbl and $160/bbl. In our downside risk scenario (15% probability), prices could average $100/bbl in 2011. In the medium term, we believe the crackdown in OPEC cohesion cannot be a bullish signal for oil prices.
An employee of a company producing and selling natural cosmetics is covered with a molasses representing oil, to protest against Canada's tar sands development, during an action in Vienna June 15, 2011. REUTERS/Herwig Prammer
We estimate that a 60 million barrel release by the end of July has the potential to reduce our three-month Brent crude oil price target by $10-12 a barrel, to $105-107 a barrel. We would expect the release to have less of an impact on prices further out the curve, as the oil would be absorbed to meet current demand. Net, we would expect that the potential impact on Brent crude oil prices in 2012 to be closer to $5-7 a barrel on average
JPMorgan The 60 mb OECD strategic oil inventory offer coordinated by the International Energy Agency should be seen not only as a stop- gap due to insufficient global supply, but also as an injection of stimulus into the world economy, and results in a significant shift in world oil pricing dynamics in the third quarter. Amidst the uncertainty it creates, it is clear that consumer countries are prepared to fill the projected 3Q2011 oil supply gap and want to see a lower oil price. We have therefore lowered our 3Q2011 price projection to $100/bbl from $130/bbl, effectively restoring the forecast we had before the disruptions to Libyan production and exports. If pursued rigorously, the 60 mb sale over 30 days is a sufficient volume to cause a very substantial drop in the oil price. Prestige Economics While this is price bearish for crude oil today and in the immediate term, these measures are being implemented with the intent to stave off significantly higher prices in the nearand medium-term. The fact that the IEA had to go to these lengths in the second year of an expanding business cycle says something very bullish about crude oil prices in the medium-and long- term. The global economy is up against a wall in terms of receiving additional oil supplies to meet demand. Additional demand or supply disruption would have a massively bullish impact on prices. After all, releasing emergency inventories is a last resort.
Capital Economics Our view has always been that oil prices would fall anyway given the deteriorating prospects for demand and the likelihood that some OPEC members, led by Saudi, would raise output regardless of the formal ceilings. Overall, the result on Thursday was fresh falls in equities and commodity prices, and in safe haven government bond yields, with the dollar regaining ground. We expect more of the same over the rest of the year, consistent with our view that the US S&P 500 will hit 1200, Brent crude will be back below $90 a barrel. Morgan Stanley The availability of 60 mmb of reserves presents a downside to our $120 a barrel price forecast for 2011 of some $10 a barrel. An inventory draw, whether from industry or government reserves, is a draw nonetheless. If government reserves are to be replenished, demand will be higher (just as supply is higher today), a support for deferred price and structure. Eurasia Group We see this course of action as a response by OECD governments, probably spurred by the Obama administration, to the rising concerns about the slowdown in economic growth. The IEA release is likely to stimulate more gasoline production particularly in the PADD I/East Coast markets where refiners have been negatively impacted by the tightness in Brent-type light sweet barrels.
OPEC Secretary-General Abdullah El-Badri, Georgia's Prime Minister Nika Gilauri, Kazakhstan's deputy Prime Minister Yerbol Orynbayev and Austrian energy group OMV's CEO Gerhard Roiss (L-R) attend a panel discussion at the World Economic Forum in Vienna, June 9, 2011. The World Economic Forum on Europe and Central Asia takes place from June 8 to 9, 2011 in Vienna. REUTERS/Heinz-Peter Bader
GERMANY, ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF YET RELEASE MAY SECOND OIL FOR OIL TO DECIDE ON OIL INTERNATIONAL ENERGY OIL RESERVE RELEASE - RESERVESRELEASERELEASE TO RELEASE PASSES AGENCY TO MAY 2011
JP Morgan, Goldman, cut oil price forecasts after IEA

SINGAPORE, June 24 (Reuters) - Bankers J.P. Morgan and Goldman Sachs slashed forecasts for crude prices in the third quarter after the International Energy Agency announced the release of 60 million barrels of oil next month to shore up the economic recovery. J.P. Morgan cut its average forecast for Brent crude to $100 a barrel in the third quarter, down from its previous projection of $130. Goldman Sachs , one of the most influential banks in commodities, expects Brent prices to fall to $105-$107 a barrel by the end of July. "If pursued rigorously, the 60 million-barrel sale over 30 days is a sufficient volume to cause a very substantial drop in the oil price," J.P. Morgan analysts led by Lawrence Eagles said in a note to clients late on Thursday. Oil bounced back a dollar on Friday after tumbling to a fourmonth low in the previous session on news the world's top consumers planned to release emergency oil reserves for only the third time ever. By 0111 GMT, Brent crude rose 84 cents to $108.10 a barrel, after settling at its lowest since February on Thursday. U.S. crude gained $1.06 to $92.08 a barrel. In a note to clients, Goldman's energy team, led by David Greely in New York, said, "We estimate that a 60 million barrel release by the end of July has the potential to reduce our three-month Brent crude oil price target by $10-$12 a barrel, to $105-$107 a barrel." "We would expect the release to have less of an impact on prices further out the curve, as the oil would be absorbed to meet current demand.
Net, we would expect that the potential impact on Brent crude oil prices in 2012 to be closer to $5-$7 a barrel on average." The analyst team stopped short of an official price revision, saying they wanted to know whether the release would be through a direct sale of crude and oil products from IEA member countries or whether they would operate an exchange. "We would expect that if the emergency release is implemented through an exchange program there will be less of an impact on crude oil prices for 2012 and beyond than if it is implemented through a direct sale, which would leave more uncertainty over when the government would choose to refill the SPR (U.S. Strategic Petroleum Reserve)," the note said. J.P. Morgan analysts said the offer of strategic oil inventory "should be seen not only as a stop-gap due to insufficient global supply, but also as an injection of stimulus into the world economy, and result in a significant shift in world oil pricing dynamics in the third quarter". J.P. Morgan said the new forecast was the same it had before the disruption to Libyan supplies. "IEA countries have replaced OPEC as the supplier of the marginal barrel to the market, with significant pricing power conferred to the U.S. by virtue of its large contribution to the release pool," J.P. Morgan said. GOLDMAN IN COMMODITIES Goldman rocked commodity markets in April when the longterm price bull suddenly turned cautious on the outlook, saying speculators had pushed prices ahead of fundamentals as Brent crested a post-2008 peak near $125 a barrel.
An employee of a company producing and selling natural cosmetics holds a Canadian flag as he stands in oil puddle to protest against Canada's tar sands development during an action in Paris June 15, 2011.
After oil prices fell in May, the bank again turned bullish and said the large correction provided a good buying opportunity, raising its year-end Brent forecast to $120 a barrel. Its current three-month forecast is $117 a barrel and its forecast for 2012 is $130 a barrel. Goldman is a long-term bull on oil and has said the 2008 peak of more than $147 a barrel could be surpassed in the coming years. Greely told Reuters on Wednesday that while a large production increase from Saudi Arabia could limit the size of any global stock draw in the second half of this year, they expected spare production capacity in OPEC to be "effectively exhausted" by rising demand in 2012. The plan to tap U.S. emergency oil reserves had been under way for nearly two months, but President Barack Obama held off in order to consult with other consuming nations and key OPEC producers, an administration official told Reuters on Thursday.
Chris Low, economist at FTN Financial in New York, said the decline in oil prices should put more spending power into U.S. consumer pockets and help deliver growth in the 2.5-3.0 percent range later this year, up from 1.8 percent seen in the first quarter. "I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy," said IEA Executive Director Nobuo Tanaka. Graphic-US strategic reserves: ( http://r.reuters.com/cah48r ) TAKES STRAIN OFF CONSUMERS While the final decision to release stocks was taken only after a 48-hour consultation period with member states earlier this week, President Obama had been seriously considering tapping reserves since May 2, the same day that U.S. oil prices peaked at nearly $115. "This was done very carefully and quietly with very significant pros and cons presented," a senior official told Reuters. The decision suggests a more active approach to tackling high oil prices by both the United States and the IEA, a 28-nation agency of industrialised countries set up after the Arab oil embargo as a counterweight to OPEC. The previous two releases followed abrupt shortages caused by the first Gulf War in 1991 and by Hurricane Katrina in 2005, and the global response was swift. In this case, it's been over 3 months since Libya's exports stopped. "(The) precedent that this decision creates definitely complicates the analysis of strategic stockpile impact on the oil market," said Eurasia Group analyst Greg Priddy. After Obama called Saudi King Abdullah and Kuwati Emir Sheikh Sabah al-Ahmad al-Sabah, he sent a low-profile but high-powered delegation to the region to discuss concerns high oil prices would hurt the global economy and ultimately demand for oil, the administration official said. Obama has spoken with the Saudi King at least twice, the official said. Talks were also held with other consuming nations, but by late May, officials agreed to hold off until after OPEC met on June 8. At that meeting, OPEC's non-Gulf members blocked efforts to raise output, and drew fresh warnings about using strategic stockpiles. The release comes as consumers grapple with costly gasoline ahead of the peak summer holiday driving season. But analysts questioned the need, pointing out that world stockpiles are at high levels by historical standards and the impact is relatively small. It represents less than one day's worth of global consumption, though it will raise the global oil supply by 2.5 percent over the next 30 days. "NOT SURE WE NEED MORE OIL" In Washington, the move was slammed by the oil lobby and Republicans, who questioned the timing given oil prices have already fallen some 20 percent from their May peak. The American Petroleum Institute, which represents Exxon and Chevron among others, said the plan was "ill timed" and "makes little sense" because there was no supply emergency. "I'm not sure we need more oil," said Christophe Barret, oil analyst with Credit Agricole.
Industrial nations tap oil reserves to boost growth

By Muriel Boselli and Roberta Rampton PARIS/WASHINGTON, June 23 (Reuters) - Industrialized nations agreed to release oil from emergency stockpiles for the third time in history, sending crude prices tumbling and providing some support to a faltering global economy. The unexpected decision to release 60 million barrels over the next month, the culmination of a plan that President Barack Obama put in motion more than a month ago, showed the deepening concern among Western leaders over the damage of high energy costs to a worsening global economy. It also suggests a fundamental shift by oil-importing nations toward a more active use of their emergency reserves, and threatens to widen a rift with OPEC just weeks after the cartel failed to raise output. "It represents a reach by member countries for the remedy of last resort to high oil prices," said John Kilduff, partner with Again Capital LLC. The International Energy Agency said the action would fill shortages caused by the Libyan conflict and get oil quickly to market while Saudi Arabia makes good on its pledge to pump more oil. It will decide whether to release more oil in a month. The decision risks aggravating OPEC, which has long feared consumer nations will use their stockpiles to undercut their sway over prices. The added oil will boost world supply by nearly 2.5 percent, or just less than Iraq produces. Obama drew immediate criticism from the oil industry and Republicans, who called it an ill-timed misuse of stockpiles that risks leaving the government with less ammunition should a deeper supply crisis emerge. Oil prices have risen 20 percent over the past year, pushing retail gasoline prices in the United States to $4 a gallon. While Brent crude peaked at $125 at the end of April, it has since fallen sharply. After dropping a further 6 percent on Thursday, prices are only a little higher than mid-February, just before the Libyan conflict began. Lower energy prices should provide relief for the sluggish U.S. economy, where household budgets have been constrained by high gas prices.
GERMANY, ITALYAMID RACERESERVES WEAK DOLLAR IEA RELEASEHALF IN NEAR TO ANOTHER NOW OIL FROM RESERVES MORE PRODUCERSOF IEA HALFWAYONRELEASE ASIA ENERGY DEMAND SAYS NO HOVER OIL YET RELEASE ON SECOND OIL OIL TO DECIDE INTERNATIONAL PASSES AGENCYWOES COAL SILVEROF ENERGY OIL RESERVE RELEASE - RESERVES HIGHS TOBOOMING RELEASE GOLD, THAN FURTHEROPPOSE FEED FOR GOLD GLITTERS OIL FROM RELEASEMARKIEA OIL ACHIEVED TO RELEASE MAY ECONOMIC RELEASE MAY 2011
The United States will provide 30 million barrels from its huge 727-million barrel crude reserve, about 1.5 days of U.S. consumption, with Europe supplying 30 pct in crude and refined products and the rest from Pacific OECD nations. The political pressure to act on oil prices has grown this year as the jump in gasoline prices hurt Obama's support as the White House was gearing up for its reelection campaign. "The cascade of bad economic news is poison for a president running for reelection," said Larry Sabato, political science professor at University of Virginia. "But politics is about smoke and mirrors. This now allows the Obama administration to claim credit for the fall in oil prices," Sabato said. TARGETING PRICE, NOT SUPPLY? Oil consumers and producers have been talking about surging prices for months, worried that the spike could hurt the fragile world economy and ultimately harm demand. Earlier this year, Washington and Riyadh had discussed a swap of crude oil to try to calm the market, but failed to reach agreement. The decision appears to represent a departure for the IEA from previous emergency releases and threatens to undo two decades of cooperation with OPEC, which earlier this month ruled out increasing its production. "There is no reason to do this," said a senior Gulf Arab OPEC delegate. "The market is not short of supply. Kuwait and the Saudi Arabia have been raising production but there have not been many buyers. The IEA is just playing politics with the U.S." Last week, OPEC Secretary General Abdullah al-Badri told Reuters the IEA was being unprofessional, and urged the IEA not to use its reserves as "a weapon against OPEC". IEA's Tanaka said the action would work in tandem with Saudi Arabia and other Gulf Arab producers.
"Our stocks release is intended to complement the action of those key producers to fill the gap. Together producer and consumers will have taken concrete steps," Tanaka said.
Oil supply hike looks a last-resort stimulus plan

By Christopher Swann and Una Galani NEW YORK/DUBAI, June 23 (Reuters Breakingviews) - A new supply of oil may be filling a different kind of demand. The world's biggest gas guzzlers are releasing 60 million barrels of shared reserves, even more than troubled Libya had been providing. But with other pro-growth policies exhausted, bidding to push oil prices down may be one of the few levers left for worried authorities to pull. It's only the third time in the nearly 40-year history of the International Energy Agency that its 28 members have dug into their stash. The last times were in the aftermath of Hurricane Katrina and the 1991 Gulf War. While the civil war in Libya provides the latest justification, there looks to be more to this decision. In particular, the IEA is releasing more oil than Libya withdrew from the market even as global demand seemed to be easing. While the absence of Libya's light sweet crude has caused problems for some European refineries, the shortage has not been global and the United States looks well supplied. Yet rich nations have a powerful economic incentive to nudge falling Brent down even further from its $126 a barrel peak in April. With the summer driving season getting underway, the IEA decision looks to have some political merits. Costly crude has been among the leading culprits restraining growth. And governments are running out of ways to rev their economies. America and Europe need fiscal tightening.
Another bout of monetary easing by the Federal Reserve probably wouldn't help much. Tapping the world's emergency stockpiles absent a real emergency is risky. Saudi Arabia has already said it will boost output to around 10 million barrels a day, leaving it with only 500,000 barrels of spare capacity, according to Goldman Sachs. Deploying government reserves of consuming nations also eats into this cushion, giving less flexibility to respond to future oil shocks. So far, the IEA is using only a tiny fraction of its ammunition. Member nations have 1.6 billion barrels held for emergency use -- so Thursday's move deploys less than 4 percent of their war chest. Switching on government spigots should help provide consumers with some relief. But using oil reserves as an instrument of economic policy looks a rather desperate last resort. CONTEXT NEWS -- The International Energy Agency said on June 23 it would release 60 million barrels of oil from strategic government stockpiles held by industrialized consumer nations because of an ongoing disruption to the supply from Libya. -- The announcement comes after OPEC failed to raise production at a meeting on June 8 and despite assurances from the bloc's biggest producer, Saudi Arabia, that it would lift supplies unilaterally. -- The IEA said it would release 2 million barrels a day over 30 days onto the world market to fill a gap left by Libya, which had been producing about 1.7 million barrels a day last year, according to the BP Statistical Review of World Energy. -- After the announcement, benchmark Brent crude oil prices traded $5 lower to just over $109 a barrel. WTI crude was trading $4 lower at $91.44 in early New York trading.
The comparative resilience of the Brent timespreads, in contrast to softening WTI spreads, explains the blowout in the spread between Brent and WTI for nearby trading months during June. Fears about a shortfall of seaborne light sweet crude over the summer have been cited by the major commodity banks to justify forecasts of sharply higher oil prices during the rest of the year. It has also been cited by many market participants as the reason why the market remains in steep backwardation and at a record premium over WTI. Potential shortages of seaborne light sweet oils were specifically cited by the IEA as the reason for its decision to call on member countries to release 60 million barrels from emergency stockpiles over the coming month "to help bridge the gap until sufficient additional oil from [producing countries such as Saudi Arabia] reaches global markets." POLICY SUCCESS If the IEA's objective was to ease fears about near-term tightness in the market, the policy has been a brilliant success. The premium for Brent delivered in August rather than September had shrunk to just 15 cents per barrel by 1925 GMT, sharply down from 45 cents on Wednesday, and a high of 59 cents as recently as June 13. Brent for September delivery compared with October had actually swung to a discount of 8 cents, down from a 32 cent premium Wednesday, and the first time it has traded at a discount since mid-February. As intended, the impact of the stock release has been concentrated on the Brent market (where fears of shortages have been greatest) rather than WTI (where bulging inventories at Cushing and other parts of the Midwest have ensured the market is well-supplied). It explains why Brent has led the market lower, at least for nearby contracts. Some market participants have criticised the stock release and questioned whether it was really necessary. Iran and other OPEC price hawks have claimed the market was well supplied and there was no need for more oil.
COLUMN-IEA stock release crushes Brent spreads: John Kemp

By John Kemp LONDON, June 23 (Reuters) - Forget the spot oil price. The real action Thursday following the International Energy Agency's decision to order a release of emergency stocks was in the timespreads. The main effect has been to erase fears about a summer shortage of seaborne light sweet crude, crushing the Brent timespreads and largely eradicating the backwardation in place since the loss of Libyan output in February. The attached chart shows inter-month timespreads for Brent and U.S. light sweet crude futures for the remainder of 2011. Graphic: ( http://link.reuters.com/mav32s ) While both Brent and WTI spreads tightened significantly following the unrest in Libya in February, they have since diverged sharply. Brent spreads have remained exceptionally tight, while WTI spreads began to soften again starting in late April, shortly before the heavy sell off in oil markets on May 5. Prices for Brent contracts nearing expiry have commanded a substantial premium over both forward months and WTI amid worries about the shortfall of light sweet oil from Libya compounded by drop in North Sea output during the summer maintenance season and the likely ramp up in European refinery throughput during Q3 and Q4.
Pumps are seen at a gas station in Tokyo June 24, 2011. Asian nations moved to release emergency oil stockpiles on Friday as part of a rare global coordinated action by consumer countries to prevent high energy prices from stunting a stuttering economic recovery. REUTERS/Kim Kyung-Hoon
While that may have been true globally, certain segments of the market appeared tight, as shown by the backwardation in Brent. Some market participants have also criticised the agency for attempting to manipulate prices and questioned whether there was really the sort of immediate physical shortage of oil that justified a stock release. But again the backwardation suggests there were genuine fears about tightness and that it was therefore appropriate for the agency to meet that specific short-term shortage of particular crude grades. The market called for more oil -- and the agency responded. DAY TO FORGET Nonetheless, the collapse in the Brent timespreads will have caused immense pain for many physical and paper oil traders. Taking positions in the time spreads is a popular strategy, particularly for the largest physical oil traders and market makers, since it is seen as strategy which maximises their advantages from market knowledge. Mercuria chief executive Marco Dunand told the Reuters energy summit earlier this month "My guess is we could have backwardation in Brent for the rest of this year and it might even get tighter" Many other physical traders shared the same view given the characteristics of this small and not terribly representative market. It is not just physical traders. Many index investors and hedge funds have been encouraged to ditch long positions in WTI and switch to Brent to benefit from better roll yields, according to Dunand.
COLUMN-IEA targets oil speculators: John Kemp

By John Kemp LONDON, June 23 (Reuters) - The International Energy Agency's (IEA) decision to release 60 million barrels of crude oil from strategic reserves is intended to drive speculators out of the market and resist the formation of a bubble by breaking expectations about near-term supply shortages, rather than target OPEC. While the intervention will be intensely controversial, especially in the industry and among hedge funds and others running long positions in crude futures and options, it can be presented as a relatively limited move in response to fears about a shortage of specific grades of crude over a short time window, smoothing the process of adjustment. It is specifically designed to counter fears about a short-term supply-demand imbalance for light sweet crude oils over the peak refining period. These worries have kept Brent futures in a steep backwardation and policymakers fear they may be contributing to the emergence of a bubble that imperils recovering economies across North America and Europe. While the IEA's decision is limited and sensible, it does signal the agency, prodded by the Obama administration, will take a more active approach to managing the market than before, and introduces a new dynamic and source of uncertainty into oil prices.
Traders work in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange in New York June 24, 2011. REUTERS/Shannon Stapleton
VOLTE FACE? This is only the third time in its history the agency has called on member countries to make a coordinated release. The IEA has traditionally opposed using stocks to blunt price rises. "To use the reserves for price management is dangerous and would fail ... a policy of releasing oil to counteract high prices would add an additional source for speculation," IEA Director for Energy Markets and Security Didier Houssin told the U.S. Senate in May 2009. If the IEA had ordered the release of stocks in response to soaring prices in 2004 "the market [might have] worried that the stock draw was reducing our strategic reserves and providing a negative incentive to invest in new supplies or improve efficiency, making the fundamental supply/demand situation even worse," according to Houssin (http://www.iea.org/speech/2009/Houssin_US_Senate.pdf). IEA and industry objections to using the SPR to mitigate purely economic disruptions or manage price rises seem to break down into several categories: (a) Strategic stocks will be quickly exhausted if they are released to meet a fundamental supply-demand imbalance (such as excess demand growth) rather than a temporary disruption (a hurricane-related shortfall or closure of the Strait of Hormuz). (b) Releasing stocks blunts price signals and delays adjustments needed to bring supply and demand back into balance. (c) Deploying stocks in response to rising prices would politicise the reserves as governments and interest groups lobbied for releases to mitigate the impact on voters, businesses and consumers. The U.S. government position has been no clearer. The Energy Department has described the SPR as the "first line of defence against disruption in critical petroleum supplies", a deterrent to hostile cut off of oil imports and providing economic security. But the department has been cool to the idea of releases in response to purely economic concerns or acting as a price regulator ( http://www.iea.org/work/2002/beijing/hartpetres.pdf ). RESERVES PURPOSE In fact, there has always been confusion around the purpose of the reserves. The 1975 Energy Policy and Conservation Act (EPCA) which established the U.S. Strategic Petroleum Reserve (SPR) sets out various conditions for releasing crude that are a complicated mix of military, strategic and physical on the one hand and economic on the other. Crude may only be released and sold following a presidential finding that "drawdown and sale are required by a severe energy supply interruption or by the obligations of the United States under the international energy program" [IEA mandated stock releases] (42 USC 77 Section 6241 (d)(1)). The presidential determination must include three findings: "(A) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration; (B) a severe increase in the price of petroleum products has resulted from such emergency situation; and (C) such price increase is likely to cause a major adverse impact on the national economy" (Section 6241 (d)(2)).
Smaller releases up to a maximum of 30 million barrels in total spread over no more than 60 days can be authorised to meet the adverse impact of smaller-scale disruptions including domestic shortages (Section 6241 (h)). PCA states the SPR is intended to "reduce the impact of severe energy supply interruptions" (Section 6201) but that can be interpreted to cover a range of situations. At one end of the spectrum are severe physical disruptions (owing to war, revolution, embargo, or natural disaster) which leave sufficient oil supplies unavailable at any price, and harm the ability to project military force or lead to severe domestic rationing and widespread disruption to the economy. Release in such circumstances is uncontroversial. At the other end are minor physical disruptions or imbalances between supply, demand and inventories that do not threaten physical availability, but push up prices substantially and threaten significant economic harm. Release in such circumstances is fiercely contested. Opponents argue intervention is a mistake and the government should rely on price increases to ration demand and incentivise more supply. The chaos in Libya and the resulting shortage of light sweet crudes sits somewhere in the middle of the spectrum between physical shortages and a pure price spike. Some production has been lost. There is no risk of the United States running out of oil but the loss of Libyan output satisfies the first release condition. There clearly has been a severe increase in prices (satisfying condition 2). Higher prices could pose a danger to the recovering economy (condition 3). So the situation in Libyan and prospective shortfalls in crude oil availability over the summer months are squarely within the sort of situations in which the IEA and the U.S. government should consider releasing crude. But that still does not explain why the IEA, under pressure from the United States, has chosen to act this time when it was so reluctant previously. PHILOSOPHICAL SHIFT The suspicion is that the decision to order the release reflects a change of personnel and philosophy -- particularly at the White House. President George W Bush and his energy advisers took a strongly pro-market orientation and were content to allow price rises to force demand rationing and rebalance the market. President Barack Obama appears much more inclined to intervene. The president has already made clear he believes speculators are to blame for exacerbating the recent price rise. Policymakers have noted the record long positions in crude futures and options built up by hedge funds and other speculators, according to data published by the U.S. Commodity Futures Trading Commission. Gyrations in oil prices (such as the sudden drop on May 5 and equally rapid recovery) have not helped the cause of those who insist prices are driven by fundamentals. Across the federal government, and in other capitals, there has been a marked loss of faith in the ability of markets to price assets correctly in the aftermath of the 2008 financial crisis, and a new willingness to intervene - for example the Federal Reserve's quantitative easing programme. Intervention that was once unthinkable now has more supporters.
The IEA was careful to welcome the decision by Saudi Arabia and its allies to increase production. This is intended to complement that output increase, bridging any near term shortfall by releasing stocks until the extra Saudi oil reaches consumer markets. The decision to release light sweet crudes is meant to alleviate shortages in that very specific part of the market, which have been made worse by the gradually declining liquidity in the Brent benchmark and the forthcoming summer maintenance season, and resulted in untypical tightness in the Brent market, reflected by a steep and persistent backwardation. It is meant to get the market over the high-demand summer period, avoiding a further draw in commercial inventories that would otherwise risk triggering a fresh round of speculation about shortages and renewed upward pressure on prices.
COLUMN-IEA is the chisel, Saudi the sledgehammer: Clyde Russell

--Clyde Russell is a Reuters market analyst. The views expressed are his own.-SINGAPORE, June 24(Reuters) - If the IEA's release of strategic stockpiles can be likened to taking a chisel to high oil prices, then the sledgehammer could be the fight between Saudi Arabia and Iran to supply Asia's crude market. The immediate impact from the International Energy Agency's pending release of 60 million barrels was to lower prices, but this could easily reverse once the market realises that it only represents 16 hours of global oil demand.
The longer impact is likely to be one of sentiment, increasing the risks around driving prices high enough to cause concern among developed nations that their fragile economic recoveries may go pear-shaped. Yet, the real cap on higher oil prices may well come as the Saudis pump more crude and offer it to Asian buyers at prices lower than what the Iranians are seeking. The public spat between the two largest producers in the Organization of Petroleum Exporting Countries is starting to spill into the physical markets in Asia. The Saudis and Iranians disagreed about whether to raise OPEC's production quota at the group's June 8 meeting, leading the Saudis to say they will unilaterally boost output. Traders and refiners in Asia say additional Saudi oil is starting to make its way onto the market. What's interesting is that some of this oil is being offered at prices below what the Iranians are trying to get. This could be seen as the Saudis going after the Iranian's market share, especially in supplying heavy crude grades to refineries in China and India. The Kingdom is expected to boost its output to 10 million barrels a day in coming months, an increase of about 1 million barrels a day over May production. There may not be enough demand for heavy oil grades to absorb the supply coming on, hence the case for prices to fall. Just how aggressively the Saudis try to displace Iranian crude remains to be seen, but the risk is increasingly skewed to lower prices while the Saudis and Iranians face off. There is no doubt the Saudis are holding the better hand than the Iranians.
Activists from India's main opposition Bharatiya Janata Party (BJP) take cover from a police water cannon during a protest against the price hike in diesel, kerosene and cooking gas cylinder in New Delhi June 25, 2011. Indian oil marketing firms are estimated to lose 1.2 trillion rupees ($26.67 billion) in revenue due to sales of subsidised fuel after Friday's round of petroleum product price hikes, Oil Minister Jaipal Reddy said. The government raised diesel prices by 3 rupees per litre, or 7.8 percent, kerosene prices by 2 rupees a litre and that of a 14.2 kg cooking gas cylinder by 50 rupees. REUTERS/Adnan Abidi
GERMANY, ITALYAMID NEAR ASIA'S TOBOOMING OIL IN IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF IEA HALFWAYONRELEASE ASIA ENERGY DEMAND SAYSPDF ON YET RELEASE DEBATE HIGHS OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL PASSES ENERGY WOES CHINA RELEASE ENERGY AGENCYWOES SPECIALTO DECIDE IN RACE TO OIL RELEASE COAL GRAPPLESCHINAS OIL FEED FOR IEA OIL RELEASE - RESERVESRELEASEMARKNOW GOLD, SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSEINDUSTRY DEMAND FROM GOLD GLITTERSON INVESTOR,RESERVEWEAK DOLLAR TO SHINES MAY ECONOMIC ENERGY NEEDS MAY 2011
They have almost three times the output of oil and they can easily afford to lower prices without plunging their fiscal position into crisis. That's not the case for Iran, which relies on oil for almost half its government revenue. No doubt the Iranians will object to being squeezed by the Saudis, but it's hard to see any option for them other than to lower their prices in order to maintain market share. Throw in a couple of wild cards in the Asian crude market, such as increasing availability of Russia's ESPO oil, and the short-term risks increase for lower prices. A cargo of ESPO may even be heading to the Mediterranean, the first time this has happened, which seems to be another piece of evidence of mounting supplies of crude available to Asian buyers.
Trying to put all the pieces of the oil puzzle together, it becomes clearer that the IEA action, the OPEC breakdown, the Saudis pumping more and possibly taking on the Iranians all come down on the bearish side of the equation. On the bullish side you have strong demand growth from China and India and lingering supply concerns from unrest in the Middle East and North Africa. But it now appears the bullish story is more of a medium- to long-term story, for the time being, the bearish theme may well prevail. Which is course exactly what the IEA and probably the Saudis want.
Editorial:
Clarence Fernandez ( Senior Sub Editor, Commodities & Energy ) +65 6870 3861; clarence.fernandez@thomsonreuters.com Richard Mably (Global Editor, Commodities & Energy) +44-207-542-6280, richard.mably@thomsonreuters.com Veronica Brown (Editor, Commodities and Energy, EMEA) +44-20-7542-8065, Veronica.brown@thomsonreuters.com Jonathan Leff (Editor, Commodities & Energy, Americas) +1-646-223-6068, jonathan.leff@thomsonreuters.com Sambit Mohanty (Editor in Charge, Commodities & Energy, Asia), +65-6870-3084, sambit.mohanty@thomsonreuters.com
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IEA Says No Further Oil Release For Now

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Oil up on IEA decision, US data, Greece optimism

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Q+A-What next after IEA decision not to release more oil?

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Japan extends relaxed oil reserve rule after IEA request

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

IEA yet to decide on second oil release -Tanaka

Italy would not block emergency IEA oil release

French min says "nothing is planned" for IEA release

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

No need for more IEA oil reserves yet

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Asia Tankers-Crude freight rates to ease ahead of IEA decision

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Germany, Italy may resist 2nd IEA oil release

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

COLUMN-IEA succeeded in providing temporary liquidity: John Kemp

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

World oil demand to strain supply in 2012-IEA

(Continued on page 12)

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

IEA move could add to storage, gold appeals

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

IEA trims total oil volume planned in release

More than half of IEA oil release achieved

(Continued on page 14)

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

TABLE-Oil to be made available under IEA release plan

Public 30,640 3,467 3,467

Crude Industry Oiil 7,915 7,915 30,640 3,958* 1,998 5,956

Refined Product 3,957* 1,469 5,426

Of which: Gasoline 300 300

diesel 1,169 1,169

Residual fuel Jet/kero oil -

95 2,770 1,173 4,038 38,145

702 3,242 2,524 959 2,274 1,071 3,000 13,773 21,688

1,620 1,023 310 600* 3,553 40,149

43 476 500 1,183 139 331 176 2,848 3,148

6 64 968 144 1,181 1,181

95 327 422 422

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Dutch seen selling full IEA oil release volume

(Continued on page 17)

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Oil will hit $150 in U.S. despite IEA -Guild

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

IEA sees sizeable take-up of oil release

Goldman: 2011 Brent to fall $6-$8/bbl on IEA clarity

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

IEA move won't hit crude market long-termEcuador

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Oil stock release looks chaotic, could backfire

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

JULY 2011 JUNE 2011 JUNE 2011

IEA may decide on new oil release by mid-July

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

IEA stock release wounds Europe's refiners

JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE

Kuwait keeps up oil output despite IEA move