Opec calls on IEA to halt oil release

Opec has not had a good year so far. It has lost production from one member, Libya and seen its reputation battered by indecision and bickering at its last meeting on 8 June. 

Now, the oil producers group has been forced to call on the Paris-based International Energy Agency (IEA) to immediately stop the emergency release of 60 million barrels of oil.

The call is likely to fall on deaf ears. The IEA’s 28 member countries voted on 23 June to release 60 million barrels of crude oil and refined products onto the global market to offset the loss of Libyan production and to ease prices which remain above $100 a barrel at $105 a barrel for Brent crude futures.Speaking after a ministerial meeting between the Opec and the European Union in Vienna on 27 JuneAbdullah al-Badri, Opec’s secretary-general criticised the move.

“We don’t see a good reason to release this quantity and I hope the IEA will refrain from using this practice,” Al-Badri was quoted as saying by Reuters news agency.

Al-Badri says the meeting highlighted a “robust rebound in the global economy in 2010, albeit at an uneven pace across different regions” and warnedthe momentum “is expected to moderate this year”, creating downward risks for oil demand.

Opec says it “continues to offer an adequate level of spare capacity for the benefit of all”.The IEA is clearly not convinced. It estimates that the unrest in Libya had removed 132 million barrels of light, sweet crude oil from the market by the end of May. This may not come back on the market in 2011. As a result, the IEA will make 2 million barrels a day (b/d) available from their emergency stocks over an initial period of 30 days.

This is only the third time the IEA has taken such action. It was founded in response to the 1973-1974 oil crisis, initially to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets. It holds a total of 4.1 billion barrels in reserves. Nearly 1.6 billion barrels of this are held exclusively for emergency purposes.