The head of the world’s leading energy authority has said that some countries had failed to adopt a helpful position to calm soaring oil and gas prices, criticising “artificial tightness” in energy markets.
″[A] factor I would like to underline that caused these high prices is the position some of the major oil and gas suppliers, and some of the countries did not take, in our view, a helpful position in this context,” Fatih Birol, executive director of the International Energy Agency (IEA), said Wednesday during a press webinar.
“In fact, some of the key strains in today’s markets may be considered as artificial tightness … because in oil markets today we see close to six million barrels per day of spare production capacity lies with the key producers, OPEC+ countries.”
His comments come as energy analysts assess the effectiveness of a U.S.-led pledge to release oil from strategic reserves to stymie surging fuel prices.
In the first such move of its kind, President Joe Biden announced a coordinated release of oil between the U.S., India, China, Japan, South Korea and the U.K.
The U.S. will release 50 million barrels from the Strategic Petroleum Reserve. Of that total, 32 million barrels will be an exchange over the next several months, while 18 million barrels will be an acceleration of a previously authorized sale.
OPEC and non-OPEC producers, an influential group often referred to as OPEC+, have repeatedly dismissed U.S. calls to increase supply and ease prices in recent months.
Birol said the IEA recognized the announcement made by the U.S. parallel with other countries, acknowledging surging oil prices had placed a burden on consumers around the world.
“It also puts additional pressure on inflation in a period where economic recovery remains uneven and still faces a number of risks,” he added.
Birol said he wanted to make clear that this was not a collective response from the IEA, however. The Paris-based energy agency only acts to tap energy stocks in case of a major supply disruption, he said.
“A new and unchartered price war”
Oil prices have jumped more than 50% year-to-date, hitting multi-year highs as demand outstripped supply. The momentum behind the price rally has even tempted some forecasters to predict a return to US$100-a-barrel oil, although not everyone shares this view.
International benchmark Brent crude futures traded at US$82.27 a barrel on Monday afternoon in London, down around 0.1%, while West Texas Intermediate crude futures stood at US$78.47, little changed for the session.
“A new and unchartered type of price war is brewing in the oil market,” Louise Dickson, senior oil markets analyst at Rystad Energy, said on Wednesday in a research note.
“The world’s biggest consumers of oil have pledged an unprecedented and relatively sizeable release of strategic reserves onto the market to quell high oil prices amid pandemic recovery.”
Rystad Energy said that if the oil set to be released from the U.S., China, India, Japan, South Korea and the U.K. started as early as mid-December, it could be enough to outpace crude demand as soon as next month.
“This begs the question of just how strategic the timing is from Biden, Xi and others if fundamental reprieve is already just around the corner in 1Q22,” Dickson said.
“The release may be a case of too much, too late, as the oil market was tightest and needed supply relief in September,” she added.