US Energy Secretary Steven Chu announced today that the US and its partners in the International Energy Agency will release a total of 60 million barrels of oil onto the world market over the next 30 days to offset the disruption in the oil supply caused by unrest in the Middle East.
As part of this effort, the US will release 30 million barrels of oil from the Strategic Petroleum Reserve (SPR). The SPR is currently at a historically high level with 727 million barrels.
The IEA estimates that the unrest in Libya had removed 132 million barrels of light, sweet crude oil from the market by the end of May. Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011.
Given this loss and the seasonal increase in demand, the IEA welcomed the announced intentions to increase production by major oil producing countries. As these production increases will inevitably take time and world economies are still recovering, the threat of a serious market tightening, particularly for some grades of oil, poses an immediate requirement for additional oil or products to be made available to the market. The IEA collective action is intended to complement expected increases in output by these producing countries, to help bridge the gap until sufficient additional oil from them reaches global markets.
Total oil stocks in IEA member countries amount to more than 4.1 billion barrels, and nearly 1.6 billion barrels of this are public stocks held exclusively for emergency purposes. IEA net oil-importing countries have a legal obligation to hold emergency oil reserves equivalent to at least 90 days of net oil imports. These countries are holding stock levels well above this minimum amount, currently at 146 days of net imports.
The IEA Governing Board will within 30 days of this notice reassess the oil market, review the impact of their coordinated action and decide on possible future steps.