IEA will not wait for war to consider oil release
www.forbes.com Reuters, 01.10.03, 10:37 AM ET
LONDON, Jan 10 (Reuters) - War in Iraq, if an oil strike in Venezuela was still running, would be enough for the International Energy Agency to consider releasing strategic reserves, the head of the agency said on Friday.
The IEA's Acting Executive Director William Ramsay told Reuters in an interview that discussions on that possibility could start as early as next Friday, depending on the oil market's response to Sunday's OPEC meeting.
"Iraq and Venezuela both being out would certainly be enough for the IEA to think about an emergency release," said Ramsay. "Whether or not we conclude that it is necessary depends on where we are with surplus OPEC capacity and the timing and the fundamentals on the market."
A six-week-old strike in Venezuela has cut some 2.5 million barrels a day of exports and, with the threat of war, forced prices recently to more than $33 a barrel for U.S. crude.
OPEC meets on Sunday to decide higher production quotas to fill the Venezuelan outage.
"We're quite pleased with them stepping up to the plate," said Ramsay. But only Saudi Arabia and the United Arab Emirates had sufficient capacity to add actual supply, he said.
The Venezuelan strike meant the Paris-based IEA, advisor on energy to 26 industrialised nations, would not need to wait for war to start considering delivering emergency supplies, said Ramsay.
"If OPEC comes out on Sunday with something that satisfies the market that it is providing real incremental barrels then a response outside OPEC may not be needed," he said.
"If the market says on Monday or Tuesday, 'that's not enough', I believe our member countries will have to start chatting."
Ramsay said a scheduled meeting of the IEA governing board on Friday January 17 could consider the issue.
"There could be a process engaged on Friday to take a hard look at it," he said. The meeting's main agenda is to elect an new Executive Director to replace Robert Priddle who retired at end of last year.
Ramsay said some in Washington would prefer any release from the U.S. Strategic Petroleum Reserve to come as part of IEA action. Some U.S. lawmakers have been calling for a sale of SPR oil to stabilise crude prices.
He said: "There's a robust debate in Washington between those who want to be very strategic about the reserves and those who want to put them out there under less rigorous criteria."
"Many of those who are reluctant to use the SPR ask why the SPR should be used as a marginal supplier of barrels to the world. They say: 'it's a global market there should be a global response.'
He said it would make sense if OPEC were to use all its spare capacity before the IEA tapped emergency reserves.
"I think OPEC would have in mind using its capacity. It makes more sense pumping geologic than strategic reserves.
"I would think Saudi Arabia is already clearing the mothballs from some spare capacity so that it doesn't take as long as the 90 days that have been indicated in the past to get that oil onstream," Ramsay said.