Oil consumers decide against new stocks release

International Energy Agency (IEA) Executive Director Nobuo Tanaka attends a meeting of the CEOs of global energy companies called ''New paths to energy security'' at the St. Petersburg International Economic Forum, June 17, 2011.

TOKYO/PARIS (Reuters) - The world's top oil consuming countries on Thursday decided against releasing more stocks into the market even though high prices still weigh on the global economy, saying they believed producers have started pumping more.

The energy watchdog for the industrialized nations, the International Energy Agency, said not a single one of its 28 members had asked for more oil to be released. That included the United States, one of the leading architects of the first release a month ago.

"The IEA also notes a sharp rise in OPEC oil production... However, a number of uncertainties remain which demand vigilance, notably the duration of the Libyan disruption, the future evolution of OPEC supply as well as the final impact of the stock release itself; much of the oil is only now entering the physical market," the IEA said in a statement.

IEA members agreed to release 60 million barrels in emergency stockpiles last month, only the third release in the agency's history, as concern grew in consumer countries that high oil prices were hurting a fragile global economy.

Oil prices fell after the release but have since moved higher, raising the possibility the IEA would boost world oil supplies again.

"No country asked me to release additional barrels," the IEA's executive director, Nobuo Tanaka, told Reuters in an interview on Thursday.

A decision to release stocks has to be backed by a unanimous decision of the IEA's 28 members, who include the United States, Germany, France, Britain and Japan.

In addition, the United States has no plans to act unilaterally and release its reserves into the domestic market, an official from the U.S. Department of Energy said.

Oil prices fell more than 10 percent in the days after the IEA shocked world markets by announcing the emergency release of supplies on June 23.

The day before that decision Brent crude was trading around $114 a barrel. Brent settled down 74 cents at $117. 51 a barrel on Thursday.

The agency would be flexible and would be ready to act and release more oil if necessary, Tanaka said. IEA members hold more than 4 billion barrels of oil in stock, of which nearly 1.6 billion barrels are held for emergency purposes only.

The IEA said in June the release would cover the gap in supply resulting from the conflict in OPEC-member Libya.

But some sales including of products in Europe have been met with skepticism as traders said the IEA was not releasing the right type of stocks. Various estimates suggest the IEA has placed only two thirds of 60 million barrels so far.

On Thursday, the IEA said it had encouraged members to allow industry the maximum of flexibility in replenishing stocks, preferably until year-end or beyond.

Critics of the June decision said at the time the move could aggravate consumer relations with OPEC, which produces around 29 million bpd, or about a third of global needs.

U.S. Republicans said the release of stocks was an ill-timed misuse of emergency supplies when oil prices were already off their peaks.

Tanaka defended the IEA decision. He suggested the action had alleviated price pressures on light crude, similar to the type of oil produced by Libya, because its price differentials had come down compared with heavier crude.

"Downstream refining margins are definitely improving," he said. "So we think we are successfully impacting the market by the release. We could say that prices could have been higher, much higher, if we hadn't made any strategic release of stocks."

SAUDI ARABIA

The release of emergency stocks in June coincided with policymaker concerns that high oil prices would choke off the world's fragile recovery from the global financial crisis.

U.S. President Barack Obama was under pressure domestically as retail gasoline prices climbed to $4 a gallon. OPEC refused to increase supplies to assuage consumer concerns at a meeting in June.

Having failed to convince fellow members of the producer group of the need for more supplies, Saudi Arabia, OPEC's biggest producer by far, increased its exports unilaterally.

Tanaka said the kingdom was expected to increase its output to as much as 10 million barrels per day in July. That would be around 200,000 bpd higher than June's output, he said.

"It (market) is looking a lot less tight and yes I would characterize it as adequately supplied assuming OPEC sustains production at recent higher levels," David Fyfe, the head of the IEA's oil industry and markets division, told a conference call.

A Reuters survey of OPEC output estimated Saudi Arabia's output in June at 9.4 million bpd and OPEC's total production at 29.45 million bpd.

Before June, the last emergency release of supplies by the IEA was in 2005 when Hurricane Katrina devastated oil infrastructure in the U.S. Gulf of Mexico.

The only other release in the 37-year history of the IEA was at the time of the first Gulf War.

The agency, part of the Paris-based OECD, was formed in response to the 1973/74 oil crisis and promotes energy diversity and efficiency.

(Additional reporting by Alex Lawler and Barbara Lewis in London, Marie Maitre in Paris, Tom Doggett in Washington; writing by Dmitry Zhdannikov; Editing by David Gregorio)