IEA defends release of stocks of crude oil

The oil consumers group leading this month's release of 60 million barrels of crude defended the move yesterday despite its failure to lower the oil price.

The International Energy Agency (IEA), the organisation based in Paris that represents the interests of 28 major oil-consuming nations, is putting an extra 2 million barrels a day on to the market every day this month. But the move made only a temporary dent in the oil price, with Brent crude, the European benchmark, trading yesterday at US$117 a barrel, or about $3 above levels before the release announcement.

"Much ink has been spilt subsequently suggesting that the IEA action comes three months too late, depletes emergency stockpiles and has failed to reduce rampant crude and motor fuel prices," the IEA wrote yesterday. "However, we feel compelled to point out that critics cannot have their cake and eat it too."

The IEA said this month's supply rise would continue to have an effect on the market through next month.The report reflected a sense of self-examination within the IEA, which has reached into its strategic reserves only twice before, once in 1991 during the First Gulf War and once after Hurricane Katrina in the US in 2005. It did not act in 2008 when the price of oil rose to a record high of $147 a barrel.

"The IEA is likely now sensitive to the fact that they were essentially cheerleaders to the price rise of 2008," said Jamie Webster, an analyst at PFC Energy.

This year oil prices climbed to $127 amid fears of the impact of regional unrest. But it was only after Opec's failure to raise its production ceiling last month that the IEA reached into its crude stockpiles.

In yesterday's report, the IEA explained why it waited to make a move.

"Market intervention in lateFebruary, when the Libyan crisis broke and prices surged by at least $10 [per barrel] would have been tempting, were price control really the prime motivation," wrote the IEA. "But the presence of a supply disruption, and sharply higher prices is not, by itself, justification for a collective action. Market context is also important."

ayee@thenational.ae