The chairman of the world’s largest energy authority has criticized “artificial tightness” in energy markets for failing to take a supportive stance to calm skyrocketing oil and gas prices.
″[A] factor I would like to underline that caused these high prices is the position some of the major oil and gas suppliers, and some of the countries did not take, in our view, a helpful position in this context,” Fatih Birol, executive director of the International Energy Agency, said Wednesday during a press webinar.
“In fact, some of the key strains in today’s markets may be considered as artificial tightness … because in oil markets today we see close to 6 million barrels per day of spare production capacity lies with the key producers, OPEC+ countries.”
The remarks by Birol come as energy specialists examine the success of a plan made by the United States to release oil from strategic reserves in order to halt rising fuel costs.
President Joe Biden announced the first-ever coordinated release of oil by the United States, India, China, Japan, South Korea, and the United Kingdom.
The United States will withdraw 50 million barrels from its Strategic Petroleum Reserve. Of that total, 32 million barrels will be exchanged over the following few months, while 18 million barrels will be sold sooner than planned.
In recent months, OPEC and non-OPEC producers, known as OPEC+, have consistently ignored US efforts to boost production and lower prices.
Birol stated that the IEA appreciated the declaration made by the United States in parallel with other nations, noting that rising oil prices had imposed a hardship on consumers worldwide.
“It also puts additional pressure on inflation in a period where economic recovery remains uneven and still faces a number of risks,” he added.
However, Birol stated that the IEA’s response was not a group effort. According to him, the Paris-based energy organization only moves to access energy inventories in the event of a serious supply disruption.
Oil prices have risen more than 50% year to year, reaching multi-year highs as demand has outstripped supply. The price rally’s strength has prompted some pundits to expect a return to $100-per-barrel oil, though this is not universally held.
On Monday afternoon in London, international benchmark Brent oil futures were trading at $82.27 a barrel, down around 0.1 percent, while West Texas Intermediate crude futures were trading at $78.47, hardly changed for the day.
“A new and unchartered type of price war is brewing in the oil market,” Louise Dickson, senior oil markets analyst at Rystad Energy, said on Wednesday in a research note.
“The world’s biggest consumers of oil have pledged an unprecedented and relatively sizeable release of strategic reserves onto the market to quell high oil prices amid pandemic recovery.”
According to Rystad Energy, if the oil planned to be released from the United States, China, India, Japan, South Korea, and the United Kingdom began as early as mid-December, it may be enough to surpass crude demand as early as next month.
“This begs the question of just how strategic the timing is from Biden, Xi, and others if fundamental reprieve is already just around the corner in 1Q22,” Dickson said.
“The release may be a case of too much, too late, as the oil market was tightest and needed supply relief in September,” she added
(Adapted from CNBC.com)