IEA to Release Emergency Oil Stocks in the Global Market by anamaulida


									The oil prices came down by more than 6 percent with the announcement of
the IEA to release emergency stock piles.This was an unexpected move by
the IEA to the markets. This decision by the IEA deeply reflected the
growing unease and concerns of the OECD nations about high fuel costs in
an already fragile and weak global economy.The $130 per barrel was
amended to $100 per barrel by JP Morgan in the third quarter. However, he
cautioned that if the release of this oil affected the prices too
drastically, the amount of oil supply would be cut down. Low demand by
the consuming countries would lead to the same measures.The low oil
supply from OPEC due to the turmoil in Libya was the deciding factor for
the EIA to release emergency oil stocks, amidst fears for the global
economy.Westmore stated that this has not affected the oil industry
scenario largely. Marketers realising this are trying to cash in on the
weakness. He states that though the oil supply is tight, it is sufficient
to meet the consumer demand on a world aggregate level.The IEA plans to
release 60 million barrels of government stocks in the global oil market.
This would be a 2.5 percent increase in the global oil supply causing oil
prices to lower drastically.Traders had been expecting Saudi Arabia to
sway OPEC members and agree to an increase in oil supply over a period of
time. This was the third time that IEA has used this release mechanism
and was completely shocking to the traders.John Vautrain the director at
Purvin & Gertz energy consultants stated that politician were under a lot
of pressure and would take any measures necessary to lower the oil
prices. Vaultrain remarked that there is no telling how long the turmoil
in Libya would continue. Releasing surplus oil in such a scenario could
be beneficial but can be executed only a few times. He also doubted the
scale of impact, such a move would render.Venezuela also doubted any long
term impact of such move and accredited it to being a political decision
related to the US elections.The release of oil from IEA may account to
Saudi Arabia pumping less oil by the end of the year than it originally
planned.The capital analyst of Barclays stated in a note that past
experiences indicate that the producer governments do not react well to
the demands made by the consumer governments.Bullish oil market turns
BearishMinutely watched by markets, the Goldman Sachs forecasts predicted
the fall of Brent crude oil prices to around $10 to $12 per barrel.Global
concern over high fuel prices, more than expected jobless claims for the
US the Federal Reserve's forecast of low US growth along with the evident
decline of Chinese manufacturing had already led to a sharp decline in
oil prices.The 3 million barrel per day by IEA in the next 30 days
surpasses the oil deficit in the supply due to the situation in Libya.
This move is questioning against the generally held view in the industry
that the market is now not deficit in oil supply. However, industry
analysts agree that the market may tighten later in the year.Light, sweet
crude that markets have lost due to the turmoil in Libya will be released
from the U.S. Strategic Petroleum Reserve in the form of 30 million
barrels. However, it is doubtful if this crude will be able to reach to
the European market.Tilak Doshi the chief economist at the Energy Studies
Institute of the National University of Singapore stated that this move
by the IEA was actually an emergency move in a non-emergency situation.
The real motive was to put a limitation on the advantages of the high oil
price.The first two releases from the IEA were immediately after the Gulf
War and Hurricane Katrina. This third release by the IEA is seen by
analysts as a means to control prices in an effort to help the global
economic recovery.This move by the IEA should not only be seen as a lone
move due to reduced global oil supply but also as an aid boost world
economy, amounting to a prominent change in the third quarter dynamics of
world oil pricing, stated JP Morgan.

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