IEA boss criticizes artificial narrowness in the energy markets
Pictured are oil pump jacks in the Kern River oil field in Bakersfield, California.
Jonathan Alcorn | Reuters
The head of the world’s leading energy agency said some countries had failed to take a helpful position in calming soaring oil and gas prices and criticized the “artificial narrowness” of the energy markets.
“[A] I would like to emphasize that these high prices were caused by the position of some of the major oil and gas suppliers and that some countries have not taken a helpful position in this regard, “Fatih Birol, Executive Director of the International Energy Agency shared during a Wednesday Press webinars with.
“In fact, some of the most important pressures in today’s markets can be seen as artificial narrowness … because in the oil markets today we see almost 6 million barrels of free production capacity per day at the main producers, the OPEC + countries.”
His comments come as energy analysts evaluate the effectiveness of a US-led pledge to release oil from strategic reserves to prevent soaring fuel prices.
As a first such move of its kind, President Joe Biden announced a coordinated release of oil between the US, India, China, Japan, South Korea and the UK
The US will release 50 million barrels from the Strategic Petroleum Reserve. Of this total, 32 million barrels will be exchanged over the next few months, while 18 million barrels represent an acceleration of a previously approved sale.
OPEC and non-OPEC producers, an influential group often referred to as OPEC +, have repeatedly denied US demands in recent months to increase supply and lower prices.
Birol said the IEA had acknowledged the US announcement in parallel with other countries, recognizing that rising oil prices had weighed on consumers around the world.
“It also puts additional pressure on inflation at a time when economic recovery remains uneven and still faces a range of risks,” he added.
Birol said he wanted to make it clear, however, that this was not a collective response from the IEA. The Paris-based energy agency is only acting to tap energy stocks in the event of a major supply disruption, he said.
“A new and unexplored price war”
Oil prices have risen more than 50% since the start of the year and have hit multi-year highs as demand outpaced supply. The momentum behind the price rally has even led some forecasters to predict a return to $ 100 a barrel of oil, although not all share the same view.
The international benchmark Brent crude oil futures were trading at $ 82.27 a barrel in London Monday afternoon, down about 0.1%, while West Texas Intermediate crude oil futures were trading at $ 78.47, which is hardly changed for the session.
“A new and unexplored kind of price war is brewing in the oil market,” said Louise Dickson, senior oil market analyst at Rystad Energy, in a research note on Wednesday.
“The world’s largest oil consumers have promised an unprecedented and relatively large release of strategic reserves to the market to curb high oil prices amid the pandemic recovery.”
Rystad Energy said that if US, China, India, Japan, South Korea and UK oil is to be released as early as mid-December, it could be enough to outperform crude demand as early as next month.
“This begs the question of how strategic the timing of Biden, Xi, and others is when a basic pardon is already around the corner in 1Q22,” said Dickson.
“The release could be too late as the oil market was at its most tight and needed supply relief in September,” she added.
– CNBC’s Pippa Stevens contributed to this report.