NEW YORK (Reuters) – World oil consumers are likely to tap into emergency oil inventories as soon as early September after the International Energy Agency (IEA) dropped its resistance to a U.S.-led plan, the industry journal Petroleum Economist reported on Friday, citing unnamed sources.
The IEA, whose chief dismissed the need for emergency action as recently as a week ago, is now thought to have agreed to the idea, asking Washington not to pursue a unilateral release, the monthly journal reported in an article by editor Derek Brower, who also writes for the Economist magazine.
A release of as much or more than last year’s 60 million barrel injection could occur as early as September, it said, citing market insiders. It said that the sharp decline in Iran’s oil exports this year would be used as a justification.
“Whether it’s self-inflicted or not, that’s still a supply disruption,” the article quoted an unnamed an official at a government backing the release as saying. The Petroleum Economist has been a well-regarded energy industry publication for decades, but it is better known for its sophisticated analysis and detailed maps than for breaking news.
Talk of tapping into strategic stockpiles resurfaced last week after Reuters reported that the White House has began “dusting off” old plans for a possible release as it fears that the 30 percent rise in oil prices since June could undermine the effect of sanctions on Iran. Analysts also have said the move could be timed to aid President Obama’s reelection effort.
The Petroleum Economist said the White House had spent “recent weeks” seeking to persuade other countries to join the plan, although officials in both the United States and other IEA members told Reuters that no talks had been held by last week.
Last Thursday, a source familiar with the matter said U.S. officials were waiting to assess market conditions after the Labor Day holiday in early September before making a decision.
Benchmark Brent crude oil prices dipped about 60 cents as the report circulated on Friday, but the impact was muted by very light summer trade, oil platform closures as a storm heads toward the U.S. Gulf and questions over whether the IEA would ultimately follow through with action.
FRANCE, UK SUPPORT; SAUDI CONSULTED
The Petroleum Economist, part of the Euromoney group, reported that France and Britain, both of which had signaled their support for releasing reserves during an earlier round of discussions in the spring, have endorsed the strategy.
It cited a diplomatic source as saying a British cabinet official had discussed the move in Washington in recent days.
Last Friday, the executive director of the International Energy Agency, Maria van der Hoeven, said there was “no reason for a release,” and that no other IEA member was considering such a measure. She said then that she had not been in contact with the White House over possible intervention.
The Petroleum Economist article said that the IEA had changed its stands after “lengthy talks with US Department of Energy officials in Washington earlier this month”.
The IEA was not immediately available for comment on Friday, but an agency spokesperson had told the journal that the agency “continuously monitors the oil market and remains in close contact with its member countries’ governments so that it stands ready to act swiftly if needed and appropriate”.
Officials in Japan and South Korea — both of which have cut back Iranian imports in order to avoid new U.S. sanctions — also dismissed the need for emergency supplies last week. The Petroleum Economist story said some IEA members were still opposed, including Germany.
U.S. and UK officials have consulted on the plan with Saudi Arabia, according to the report. The kingdom believes that there is no need for a release, but that the decision is up to consumer contries, according to the story.
Oil consultancy Petroleum Policy Intelligence (PPI) said this week that some consumer nations had discussed a possible price trigger of $115 to $120 a barrel for taking action, according to the journal’s report.
(Reporting by Jonathan Leff; Editing by Marguerita Choy and Leslie Gevirtz)