NEW YORK (Reuters) - The International Energy Agency announced on Thursday it will release 60 million barrels of oil from strategic inventories.
The release will consist of 2 million barrels over 30 days. The U.S. Department of Energy said it will release 30 million barrels from its Strategic Petroleum Reserve as part of the IEA’s 60 million barrel release.
Brent crude prices traded down more than $5 to $109 a barrel after news of the release.
HELEN HENTON, HEAD OF COMMODITY RESEARCH, STANDARD CHARTERED BANK
“It’s a significant amount, we predict the increase in demand for OPEC crude will be up 1.4 million barrels per day for Q3 compared to Q2, so it’s in excess of that. The timing is very strange though. It comes after the Saudis said they would increase output so it suggests they think this might not be enough. I think it will knock prices lower, I expect prices to be lower a month from now.”
MATT SMITH, ANALYST AT SUMMIT ENERGY IN LOUISVILLE, KENTUCKY
“It’s difficult to understand the logic behind why IEA is doing this now. The market was taken by surprise because this was after Trichet’s comments this morning and the bearish news from the Federal Reserve.
“We already knew that the market would tighten in the second half of the year. This is a preemptive measure to keep prices below triple digits on WTI crude.
“If they are going to release the 60 million barrels over a course of a few months, then they will be matching off the Libyan outage. Still, it would have made more sense if they did this immediately after the OPEC meeting. It looks like they missed their opportunity there. We were led to believe that OPEC was going to increase supply.”
CHRISTOPHE BARRET, OIL ANALYST, CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK
“It’s a question of need. I’m not sure we need more oil. There’s been weakness of demand and I don’t see what the release of 60 million barrels of oil adds to the market. We don’t need it in terms of levels of stocks, we are 35 million barrels above the five year average already. It’s the equivalent of two months Libyan production, so I’m not sure it will make much difference.”
RICHARD ILCZYSZYN, SENIOR MARKET STRATEGIST AT LIND-WALDOCK IN CHICAGO
“Its a shot in the arm. Anybody who has got oil is going to start covering and that’s why we’re seeing the markets falling.. this is likely going to spread to equities and other markets as well, as the commodities market takes a break.”
CHRIS JARVIS, SENIOR ANALYST, CAPROCK RISK MANAGEMENT, HAMPTON FALLS, NEW HAMPSHIRE
“Today’s IEA announcement that there will be a release of 60 million barrels of crude stocks with the U.S. accounting for 30 million barrels is more of a reflection over concerns of a slowing global economy versus supply disruptions. Clearly the energy complex is trading down on the news as traders digest it.
“Historically the release of strategic energy reserves have produced the opposite effect, with markets typically trading higher. However, given the recent sluggish global economic data, we believe many will view this move as a way to ‘jawbone’ the markets lower to take pressure off consumers, a sign of weakness.”
OMER ESINER, SENIOR MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON
“It could be a signal of the overall the level of concern about a slower global economy. We’re seeing the euro pare some losses, but in the long run, if anything, lower oil prices should be a euro negative, as it has been energy and food prices driving euro zone inflation. This may be a knee-jerk, risk-positive reaction.”
DOMINICK CHIRICHELLA, ENERGY MANAGEMENT INSTITUTE, NEW YORK
“I think the IEA is trying to act like a central bank. I suspect they are thinking they need to hold less oil in storage right now, but the risk here I think is oversupply. With the IEA dumping 2 million barrels a day onto the market I don’t think anyone will be comfortable being long oil. I think U.S. oil prices will trade in the $85 to $92 a dollar range going forward. We may see oil trading in the $80s very soon.”
“I see oil demand underperforming a lot of the estimates out there since the economy seems to be going south. Bernanke’s speech was bearish yesterday about the US economy, and there’s no Fed solution left; the Bernanke put is gone now. Chinese PMI data overnight was negative; manufacturing is slowing; Europe is a mess and Greece could be a disaster for Europe’s banks.”
“Saudi Arabia meanwhile is saying it will produce more oil, and it when the Saudis say that, they usually do it. More Libyan output is also likely to come into play.”
STEPHEN SCHORK, EDITOR, THE SCHORK REPORT, VILLANOVA, PENNSYLVANIA
“The market is going crazy because of the IEA numbers. Looks like we’re headed below $90/ barrel.”
“The move is significant, as it represents a reach by member countries for the remedy of last resort to high oil prices. Clearly, the energy price spike is being cited as the reason for the economic slowdown and this is a reaction to that. The Libyan outage provides good cover.”
“I’m really surprised. Everyone’s been saying they’ve got enough stocks. This should keep WTI under the $100 (per barrel), but really we want Brent there, and this should help.
HARRY TCHILINGUIRIAN - BNP PARIBAS, HEAD, COMMODITY MARKETS STRATEGY
“The consumer-producer dialogue is going to run into some troubled waters as Saudi has begun to increase its production. The incentive to raise production is now lessened. In the end, stocks are only a short term solution”
CARL LARRY, DIRECTOR OF ENERGY DERIVATIVES AND RESEARCH, BLUE OCEAN BROKERAGE, NEW YORK, NY
“This is an economic stimulus ...in oil dollars. And since its a global move, it should have a nice carry effect if it works.
“On the other hand, I think we have confirmed the bottom of the oil market here at $109 for Brent and $90 for WTI. I am not sure where we can find much more bearish news; even if Libya were to be resolved, the IEA would (or could) rescind the mandate and we’re at no change in supply.”
“The last precipitous drop was because the market was rightly expecting the IEA to announce they were going to release some reserves. The release of the 60 million barrels will take some heat off the market as this is coming after QE II and a dismal outlook for demand.
“With Jean- Claude Trichet warning the Euro zone is flashing red, the weak manufacturing data out of China and Bernanke’s bleak outlook, demand is falling but now we have more oil in the market.”
TOM BENTZ, DIRECTOR, BNP PARIBAS COMMODITY FUTURES, INC, NEW YORK, NY
“That’s what the market was worried about. We’ve already fallen in anticipation of the stockpile release. The 60 million barrels is not one day’s worth of supply but still a lot of supply. Its would cover more than what we’re losing from Libya.”
“The reason why prices has stabilized a bit after the news is because traders were afraid the stockpile release may actually be larger.”
TOM PORCELLI, U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK
“This is actually generally good news. This wasn’t expected. No-one expected the IEA to release 60 million barrels of oil. Whatever movement we saw in Treasuries prior to that claims number is likely to unwind. Whatever fear the market had anticipated surrounding that press conference is unfounded.”
GENE MCGILLIAN, ENERGY ANALYST, TRADITION ENERGY, STAMFORD, CONNECTICUT
“Obviously the release of barrels is contributing to the fallout from Fed comments about the economy and ECB president comments about European credit. The market is in freefall.
“With more oil being put on the market the price is under pressure... and that goes to say that this is the light sweet crude we need and not the heavy crude. The lower economic growth outlook and higher unemployment and that we’re going to keep our interest rates lower for a long time is contributing to this.”
Reporting by Selam Gebrekidan, Antonita Devotta, Emily Flitter, Jeanine Prezioso, Ikuko Kurahone, Simon Falush, Joshua Schneyer, Steven C. Johnson, Eileen Moustakis, Alex Lawler