IEA says will review oil release plan late Sep, early Oct

Paris (Platts)--15Sep2005

The International Energy Agency said Thursday it was sticking with its
agreed plan to release 60-mil bbl of oil from emergency stocks and would
re-evaluate the need for any further action in late September or early
October.
     The agency agreed Sep 2 to release 60-mil bbl of oil over 30 days in
response to supply disruptions caused by Hurricane Katrina, which blasted
through the US Gulf Coast Aug 29, leaving a trail of death and destruction.
Virtually all of the US's 1.5-mil b/d of Gulf of Mexico crude production was
shut in and about 2-mil b/d of refining capacity put out of action.
     On Sep 7, the IEA's 26 member countries committed to provide a total
2.1-mil b/d of oil, broken down as 1.289-mil b/d of crude and 683,000 b/d of
refined products. It agreed to convene its governing board Sep 15 to review
the response.
     "The IEA governing board, after reviewing its initial collective response
action on Sep 2 to disrupted oil supplies in the wake of Hurricane Katrina,
has decided to maintain its action of making available to the market 60-mil
bbl of oil and oil products for a period of 30 days," the IEA said in a
statement after a meeting of its governing board in Paris.
     "The IEA will further assess its collective action as additional market
information becomes available from the pace of recovery and adequacy of
supplies to the market. the next evaluation will take place end-September or
early October," the IEA said.
     "The representatives of the 26 member countries reaffirmed their
commitment to fully implement the coordinated emergency response decision and
confirmed the market-based approach as the most effective mechanism," it said.
     In the meantime, the IEA said it would continue its communications with
oil producing countries and OPEC as it reviews world oil market conditions in
the wake of Katrina.
     The IEA stock release has helped bring oil prices down from all-time
highs of more than $70/bbl reached in New York as Katrina wreaked havoc. At
1713 GMT Thursday, US light crude was trading at $64.30/bbl, down 79 cts.
     Mandil urged consumer countries not to react to high oil prices by
cutting taxes. "We strongly recommend to our member countries....to refrain
from changing the level of tax in order to change the prices of oil for
consumers," he said. "We think it is key to avoid sheltering the consumer from
market signals."
     Any crude production increase from OPEC, which meets next week in Vienna,
would send "a good signal to the market," Mandil said, though he acknowledged
that any incremental OPEC output would consist largely of the heavier crudes
that are less in demand than the lighter, sweeter grades which have a higher
yield of light products.
     The oil producers' cartel meets next Monday and Tuesday in the Austrian
capital and is expected to raise its current output ceiling by 500,000 b/d to
28.5-mil b/d. A Platts survey last week estimated that the 10 members with
quotas under the current 28-mil b/d ceiling -- Iraq does not have one --
pumped an average 28.37-mil b/d in August. Most member countries are pumping
close to their capacity limits apart from Saudi Arabia, which says it can
bring on an additional 1.5-mil b/d on top of the 9.5-mil b/d it is currently
producing. But the Saudis say there is no demand for these incremental barrels
which are mainly heavy and sour.
     Earlier this week, the US Department of Energy said it had sold 11-mil
bbl of crude from its Strategic Petroleum Reserve as part of its commitment to
provide 30-mil bbl -- half of the 60-mil bbl pledged by the IEA. Of the 11-mil
bbl sold, 10.8-mil bbl were sweet and only 200,000 bbl sour.
     Barclays Capital analyst Paul Horsnell said Wednesday that the results of
the SPR sale should send an important message to OPEC: that the world does not
want or need heavy sour crude. "A lot of OECD governments have been pressuring
OPEC to release more crude," he said. "But if you are OPEC and all you have to
put on the market is heavy sour, why are you going to release that oil if you
know the market doesn't want it....If you know you are going to have to
deeply discount sour barrels to sell them -- and discount them to below what
the US government was prepared to sell them for -- why would you?"
      Mandil, meanwhile, said he hoped for clearer information from OPEC in
coming months regarding cartel members' plans for capacity expansion.
      A timetable for replenishing IEA emergency stockpiles has yet to be
decided, the agency's deputy executive director William Ramsay said. 
     "The basic issue is to keep [oil] available. When the trade thinks it
needs it, it will be there," he said.

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