The International Energy Agency (IEA) is ready to act if "necessary to ensure that markets remain well supplied," the IEA's Director for Energy Markets and Security, Keisuke Sadamori, told S&P Global Platts on Friday.
The agency is talking to both oil producers and oil consumers as crude prices recently reached their highest level since November 2014 on the back of heightened geopolitical concerns.
"IEA is discussing and will discuss oil market conditions and outlooks with relevant stakeholders, both oil consumers and producers," Sadamori told S&P Global Platts when asked if the IEA could call upon oil-producing nations to act.
The comments from the IEA's official come a day after Khalid al-Falih, the Energy Minister of OPEC's largest producer Saudi Arabia, said Thursday on Twitter that he had spoken on the phone with a number of fellow ministers, including those of the UAE, USA, Russia, India, and Korea, "to coordinate global action to ease oil market anxiety."
"I also talked to the Executive Director of #IEA to reassure him of our commitment to the stability of oil markets and the global economy," al-Falih said in a follow-up tweet.
Last week, the IEA said that the restoration of sanctions on Iran-the world's fifth-largest oil exporter-may have implications for the market balance, adding that it is closely following the situation. Related: China Crushes Vietnam's South China Sea Drilling Hopes
In its closely watched Oil Market Report this week, the IEA said that oil stocks in developed nations as of March were at their lowest level in three years and 1 million barrels "below the widely cited five-year average figure."
"For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market. For its part, the IEA will monitor developments closely and is ready to act if necessary to ensure that markets remain well supplied," the IEA said.
By Tsvetana Paraskova for Oilprice.com
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Comments
It can tolerate. As for supplies, oil prices are the best judge of the level of supplies in the market.
And although the OPEC/non-OPEC production cut agreement has done a sterling job in virtually balancing the market, this agreement should remain in place well into the future in one form or another. OPEC and Russia have at last found a successful and workable mechanism to virtually put an end to future glut or at least mitigate its impact on prices. They should not listen to words like “mission accomplished” from the IEA.
As for US sanctions on Iran, I have been saying for quite a while that they will not lead to supply problems as Iran will not lose a single barrel of oil exports as a result of the re-introduction of sanctions. More than 75% of Iran’s oil exports go to China and the Asia-Pacific region while the remaining 25% go mostly to the European Union (EU). China, India and other Asia-Pacific region countries as well as the EU are not going to comply with US sanctions and reduce their imports of Iranian crude. While most major buyers of Iranian crude will continue to do so, Japan and South Korea might decide to comply with US sanctions and either reduce their imports of Iranian oil or shun them altogether. However, this will be more than offset by increased imports of Iranian oil by China, India and other Asia-Pacific countries as well as the EU.
The use of Sanctions by the United States as a geopolitical and economic tool is fast becoming useless. The global oil market has been seismically changed by the introduction of the petro-yuan. The petro-yuan is already starting to serve as a refuge to countries threatened by US sanction like Iran. In effect, it is nullifying US sanctions.
Iran has already indicated that it will be using the petro-yuan for payment for its oil exports to China, the euro for its exports to the EU and barter trade with Russia, India and many other countries around the world thus bypassing the petrodollar altogether and nullifying the impact of the sanctions.
The hyping by the IEA about increases in US shale oil production and rises in US crude and gasoline inventories neither stopped the surge in oil prices nor arrested the continuous decline in global oil inventories.
The global oil market fundamentals will determine the levels of oil prices acceptable to the global economy and the level of supplies needed by the market without any help from the IEA.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London