Digital News Report – Thursday morning International Energy Agency (IEA) Executive Director Nobuo Tanaka announced that an agreement had been reached between the 28 IEA countries to release 60 million barrels of oil from individual strategic reserves. This sent shockwaves through the oil industry with sharp declines in oil prices and oil company stocks.
Light sweet crude on the NYMEX fell $4.39 (-4.60%) to $91.02 a barrel on Thursday. Even before the announcement crude began to fall raising concerns that some speculators may have been tipped-off. On Friday Brent Crude fell $1.74 (-1.6%) to $105.52 a barrel.
Equities didn’t fare any better on Friday. The share price of Exxon Mobil Corporation (XOM) fell 1.66 (-2.12%) to $76.78. Chevron Corporation (CVX) fell 1.46 (-1.47%) to $97.90 and Marathon Oil Corporation (MRO) fell 2.07 (-4.01%) to $49.55.
The American Petroleum Institute (API) challenged President Obama’s short term Strategic Petroleum Reserve (SPR) energy strategy. API President & CEO, Jack Gerard, said the U.S. needs to work on a long term strategy.
“The raiding of the Strategic Petroleum Reserve is an admission supply does matter, but 30 million barrels won’t even replace what we lost from the President’s moratorium and permitorium in the Gulf of Mexico”, Gerard said Friday. “Since last May we have lost 60 million barrels of Gulf oil production – and almost $1.5 billion in revenue that should have gone to our government.”
Other analysts question the timing. Why didn’t the United States and the consortium release reserves back in April when oil peaked?
The IEA cites the crisis in Libya for higher oil prices. “The normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further,” the group said in their statement Thursday. The governing board will meet again in 30-days to decide on possible future steps.
By Tim Edwards