Iran Oil Minister Accuses IEA of Breaching Principles

Amplifying criticism by oil producers of last week’s release of oil from emergency stockpiles, Iran’s oil minister Mohammad Aliabadi Monday accused the International Energy Agency of violating “principles” that limit when energy-consuming countries can tap reserves.

Alibabadi’s comments, which preceded a formal energy dialogue between OPEC and the European Union later Monday, underscored how the IEA’s controversial emergency release is straining relations between producers and consumers. The remarks came amid new signs Monday that suggested OPEC member Saudi Arabia will continue to raise output and as the IEA disclosed new details about its emergency release of oil.

Aliabadi, who is also OPEC president, said the IEA’s move flouted the agency’s commitment to respect market forces. His comments echoed other remarks in recent days by figures from the Organization of Petroleum Exporting Countries, who have said the IEA’s move was aimed at lowering oil prices, not in responding to a true oil supply crisis. OPEC produces about one-third of the world’s oil and meets regularly to try to influence oil prices.

“They, the IEA, have these principles. Why are they not abiding by those principles?” he said.

“Instead they are intervening in the market,” Aliabadi said. “We believe that prices have to be set by markets.”

An IEA spokesman Monday had no immediate comment on Aliabadi’s remarks.

IEA officials have emphasized that they undertook the emergency release, just the third in agency history, in response to a lengthy outage of Libyan crude and not in an effort to reduce oil prices. The IEA is a Paris-based energy watchdog that represents the governments of the U.S. and other energy-consuming countries.

Some IEA members, including Germany and Japan, released equal amounts of oil and refined products, while the United States, released only crude oil, according to IEA data released Monday. Still other countries, including France and Italy, released refined products and not crude, according to the data.

In total, an additional 41.6 million of the 60.6 million in emergency oil will come from crude oil with the rest coming from refined product, according to the data.

Oil prices continued to decline Monday following the IEA’s actions and as markets continued to fret over the Greek debt crisis. Light, sweet crude for August delivery traded down $1.11, or 1.3%, to $90.05, on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange fell $1, or 0.1%, to $104.12 a barrel.

Many market watchers anticipate that some leading OPEC producers will proceed with plans to raise oil output, in spite of the IEA’s action. Following the breakdown of OPEC talks on June 8, Saudi Arabia, Kuwait and the United Arab Emirates signalled they would unilaterally boost oil output to meet expected demand. The thinking is that even if the IEA oil goes to industrialized countries, the additional oil from OPEC members could go to Asia.

An official with Maersk Tankers, one of the world’s largest owners of crude oil carriers, said Monday he expects an increase in July and August crude shipments from Saudi Arabia to Asia.

“We anticipate that crude oil transportation from Saudi to Asia should be even stronger than it was for June,” said Claus Gronborg, head of crude for Maersk Tankers. Maersk Tankers, is a unit of Danish industrial conglomerate A.P. Moller-Maersk A/S.

Gronborg said it was “too early” to predict how it would impact the global shipping market.

“How the IEA news will impact the market short term will depend on where the extra oil goes to. Long term, we do not expect the release of Strategic Petroleum Reserve to have any impact.”

Source: Rigzone


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