Current oil supply scenario does not warrant oil release

The French government ascertained that it has sufficient crude oil from its emergency oil reserves, but is silent about actual release from supplies.

Oil prices in 2011 surged dramatically, pushing the U.S. and Europe’s planned economic recovery and major oil investment strategies in the back seat.  The oil price hike issue and its adverse effect on the countries’ economies triggered political parties to include these as debatable issues among presidentiables.

According to the French government, it is inclined to release crude oil from its supply if the IEA declares it so.   The IEA or International Energy Agency is an autonomous intergovernmental agency that provides energy advice to both member and select non-member countries.

Given the current situation, particularly the prevailing Iranian oil sanctions, Iran’s pre-emptive measures to counter act the restrictions, and the relatively poor investment climate, the IEA seems to hold back and does not see yet an immediate need to declare a release of oil reserves.  “I can still confirm that I haven’t received instruction (from the government),” said Jean-Marc Tenneson, representative of the French crude oil supply agency.

On three separate incidents, the IEA had issued advice directed at member countries to draw oil from their respective reserves.  These happened in 1991 during the earliest Gulf War, in 2005 during the aftermath of the devastating Hurricane Katrina, and most recently in 2011 during the Libyan war.

Despite the absence of a call for oil release, the IEA assures that it closely monitors global oil supply and the instabilities in the market.

Analysts have been vocal about the current geopolitical relations with Iran, which is besieged with threats from both sides.  They also believe that this has partly triggered a surge in crude oil prices.

Although the oil supply situation may be tight, President Obama assured that it is at levels where the state can still pull off more bans (involving Iran) if warranted.

By Chris Termeer