The IEA said on Thursday that it ended its release of oil from strategic reserves begun in June to compensate for a cut in supplies from Libya, just days after forecasting resumed production in the country.The International Energy Agency said its 28-member countries "concluded that the interrupted Libyan supplies have been successfully addressed by a combination of the IEA collective action and increased production from producer countries," the body said in a statement.
The IEA, which represents the major oil consuming nations, launched the collective drawdown on June 23 as the loss of the 1.6 million barrels per day of Libyan oil production had begun to affect the markets.The price of North Sea Brent quality crude had ranged between $105 and $120 per barrel since May, with the June announcement of the IEA releasing stocks causing a plunge by about $10 dollars a barrel that soon evaporated.
On Thursday, Brent North Sea crude for delivery in October jumped $2.78 to $115.18 a barrel in late London deals after the IEA said it was halting the stocks release. New York's main contract, light sweet crude for delivery in October, climbed 75 cents to $89.66.
The IEA also noted the end to the collective action, which was renewable every thirty days, comes "against a backdrop now of weakening expectations for global oil demand growth."
But while the IEA and OPEC cartel have both trimmed their forecasts for growth in oil demand, US banking titan Goldman Sachs said Thursday that crude should hit about $130 a barrel within a year as strong Asian demand offsets an economic slowdown in the West.
In the IEA action member countries agreed to make available to the market 60 million barrels of crude oil and oil products, of which 38 million barrels were released from government stocks and 22 million barrels via relaxation of obligatory stock rules on private companies.
The agency said uptake from public stocks had been 97 percent compared to 73 percent during the last collective IEA action in 2005 and that member countries will exercise flexibility in re-establishing their emergency stock levels through 2011 and 2012.
The IEA noted that the collective action required none of the involved IEA countries to go below the 90-day reserve requirement.
In its monthly review of the oil market released on Tuesday, the IEA said Libya could recover a quarter of the oil production by the end of the year and two-thirds by the end of next year.
But the agency said that the view of many in the oil industry was that a return to the pre-conflict production level of 1.6 million barrels a day could take two to three years.
"Indeed the twin challenges of creating political stability and security on the ground... are formidable," the IEA said.In the review, the agency revised its expectations of crude production capacity from zero to between 350,000 and 400,000 barrels per day by the end of 2011, rising to 1.1 mbd by the fourth quarter of 2012.
This differed with far more ambitious projections of 500,000 barrels a day by mid-September and 1.6 mbd in a year were made by the the state run Arabian Gulf Oil Company, based in Benghazi.To the IEA, security and infrastructure remain key challenges that limit any real ability to forecast a return to pre-conflict levels of production.