IEA Reports On Status of Oil Markets Following Release of SPR -- Rigzone

Link here.

A long article quoting the IEA's rationale for the release and how things stand now, about three weeks later.

If I read the IEA statement correctly, it appears that the IEA is stating strongly that the release was not due to the escalating price of oil, but rather due to refiners demand for more crude oil. In fact, the IEA notes that the price of crude was falling when they made their decision to release oil from the emergency stockpiles.

Having said that, the IEA consistently refers back to the price of oil without one mentioning the amount of crude oil that the refiners actually needed. The IEA provided lots of "dollar numbers" but no "crude oil numbers."

One quote from the long report:

Early-year industry stocks looked comfortable back in March, and there was a presumption then that other OPEC producers would immediately step in to boost supply to replace Libyan outages. In contrast, the absence up until June of major OPEC increases implied a real possibility that commercial stocks could fall to the bottom of their seasonal range, risking a renewed, damaging and sustained surge in international prices in 3Q11. The IEA therefore decided to act to address this supply-side issue, even though prices were then trending lower."

I have long maintained that OPEC does not have the spare capacity required to meet increased demand. I found this quote at the end of the article consistent with that view:

Veteran OPEC-watcher Bhushan Bahree, senior director of global oil for IHS CERA, told Rigzone in a telephone interview: "Oil supplies are ramping up." Bahree added, "There was very little incentive for the other OPEC nations to agree to increase production. They have little or no spare capacity."