PARIS (Reuters) - The West’s energy watchdog urged oil producers to boost supply to cut fuel costs, to protect economic recovery, and appeared to suggest its members could release emergency stockpiles if OPEC does not act.
“The governing board urges action from producers that will help avoid the negative global economic consequences which a further sharp market tightening could cause, and welcomes commitments to increase supply,” the International Energy Agency (IEA) said after a governing board meeting on Thursday.
The statement comes just weeks ahead of OPEC’s June 8 meeting and a day after price hawk Iran said its hardline President Mahmoud Ahmadinejad would represent Tehran at OPEC as Iran’s caretaker oil minister.
The 12-member Organization of the Petroleum Exporting Countries (OPEC) says world supplies are adequate.
“The IEA governing board expressed serious concern that there are growing signs that the rise in oil prices since September is affecting the economic recovery,” the statement said.
It said it stood ready to work with producers but added: “In this constructive spirit, we are prepared to consider using all tools that are at the disposal of IEA member countries.”
The 28-member IEA oversees large volumes of government-held oil inventories that can be released in the event of an emergency outage.
While the loss of about 1.2 million bpd of Libyan exports in February is well short of the volumes that would normally trigger an IEA emergency release, there is speculation that the world’s biggest consumer, the United States, could unilaterally tap government stockpiles.
The Paris-based IEA could not give guidance on whether or not its statement was referring to a possible emergency release but analysts said it was a sign consumers were getting frustrated with what they see of lack of action by OPEC.
“This looks like a coded message to OPEC, a shot across the bows before the June meeting,” said Bill Farren-Price of Petroleum Policy Intelligency.
The IEA normally does not comment on oil producers’ policies.
“It is quite rare that the IEA goes out directly to give suggestions to OPEC,” said Christin Tuxen at Danske Markets.
“It suggests the IEA is worried that we haven’t seen OPEC increasing supply... Libyan production has basically come to a halt and Saudi Arabia has been very slow to increase supply,” she added.
As global demand for oil increases seasonally from May to August, IEA members said there was a clear and urgent need for additional supplies to be made to refiners on a “more competitive basis.”
Oil prices have rallied sharply since the beginning of the year on unrest in North Africa and the Middle East, reaching near $130 per barrel. They corrected sharply in early May and Brent crude is now valued at $112 a barrel with signs that high prices are rationing demand in the West.
However many analysts, including from big banks like Goldman Sachs, Barclays Capital and Deutsche Bank, said they expected prices to return to or exceed recent highs at the end of 2011 due to tightening supplies.
OPEC has held its official output targets steady even as prices surged, saying supply was sufficient. Its biggest producer Saudi Arabia lifted output earlier in the year but has since cut back again, citing poor demand.
A delegate from one of OPEC’s Gulf countries earlier this month raised the possibility of increasing OPEC’s output targets to help lower prices as well as to bring official allocations back in to line with actual supply.
Some in OPEC, such as Iran and Venezuela, are likely to disagree. The attendance of Ahmadinejad at the June meeting has strengthened analysts’ view the group is unlikely to act.
Reporting by Muriel Boselli and Zaida Espana, writing by Richard Mably, editing Anthony Barker