IEA Says No Further Oil Release For Now

JULY 2011

An oil rig is silhouetted against the sunset in St. Lawrence, Texas May 9, 2008. Oil jumped to a record above $126 a barrel on Friday, extending gains to more than 11 percent since the start of the month on fuel supply concerns and a rush of speculator buying. REUTERS/Jessica Rinaldi

Oil up on IEA decision, US data, Greece optimism Q+A-What next after IEA decision not to release more oil? Japan extends relaxed oil reserve rule after IEA request IEA yet to decide on second oil release -Tanaka Italy would not block emergency IEA oil release French min says "nothing is planned" for IEA release

GERMANY, ITALYAMID ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO HOVER SEVERE POWER INTERNATIONAL WITHOIL HIGHS GAS IEA RELEASE ON MAY ECONOMIC ON WEAK OIL CHINA SHINES THE RACE TO FEED RELEASE RELEASE SPECIAL PDF FURTHEROPPOSE ANOTHER IEA DOLLAR COAL GRAPPLESCHINA’S ENERGY WOES NOW OIL —————————- ENERGY AGENCYWOES DEMAND FROM GOLD, GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF RESERVESRELEASE FORSHORTAGES BALIRESERVES GOLD PRODUCERS INVESTOR, ANDENERGY NEEDS INENERGY DEMAND DEBATE MAY 2011

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Oil up on IEA decision, US data, Greece optimism
By Matthew Robinson NEW YORK, July 21 (Reuters) - Oil rose for a third straight session on Thursday, lifted by upbeat U.S. economic data, signs of a deal to bail out Greece and confirmation the International Energy Agency would not release more emergency stocks for now. The market shook off early losses caused by weak economic data from China and turned positive as euro zone leaders were set to give their financial rescue fund new powers to help Greece overcome its debt crisis, easing concerns that have weighed on oil and other markets in recent weeks. "Expectations that the debt problems in Europe could be resolved has sent the euro rallying, weakening the dollar," said Tom Knight, trader at Truman Arnold in Texarkana, Texas. "The stock market is also up on those hopes, also a factor in support of oil's rise today." Further support came from upbeat data showing factory activity in the U.S. Mid-Atlantic region bounced back in July, as well as news members of the IEA decided against releasing more oil stockpiles despite the threat of high prices to the economic recover. Brent traded up 57 cents to $118.72 a barrel at 12:46 a.m. EDT (1646 GMT). U.S. crude rose $1.44 to $99.84 a barrel. U.S. futures briefly topped $100 a barrel for this first time since June 10, breaking out of this month's trading range between $93 and $99 a barrel. Graphic: ( http://link.reuters.com/jen72s ) Trading volumes, which have been light all week, were around 50 percent below the 30-day average in early afternoon activity.

Traders have also been eyeing U.S. efforts to avoid a potentially disastrous debt default, with pressure mounting on the White House and Congress to speed efforts to cut a deficitreduction deal. NO NEW IEA PROPOSAL The IEA shocked oil markets in June, announcing it would release 60 million barrels of oil to help replace disruptions of Libyan supply and bring down prices. Prices initially plunged, but in the month since the announcement, Brent prices have climbed back more than $10 a barrel. But on Thursday, the energy watchdog for the industrialized nations confirmed what many analysts had expected, saying not a single one of its 28 members had asked for more oil to be released, including the United States, one of the architects of the first release a month ago. An IEA official told Reuters the Obama administration had no plans to act unilaterally and release oil from its own reserves, despite ongoing concerns about the impact of high pump price on consumers. Total U.S. product demand continues to lag year-ago levels, with demand for gasoline down 2.2 percent over the past four weeks -- the heart of the summer driving season -- compared to the same period in 2010, according to government data. "The IEA's statement that it will not release more emergency oil at this time is, in my view, bullish for the market, although there has been talk that they would do just that." said Phil Flynn, analyst for PFGBest Research in Chicago. CHINA CONCERNS Chinese manufacturing contracted for the first time in a year in July, as monetary tightening and sluggish global demand weighed on the economy, according to HSBC flash PMI.
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IEA RELEASE FURTHEROPPOSE ANDENERGY NEEDS INENERGY DEMAND GERMANY, ITALYAMID ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO HOVER OIL YET PDF ON WITHSECOND OIL ON SEVERE POWER INTERNATIONAL MAY ECONOMIC GAS CHINA SHINES THE RACE HIGHS ONRELEASE SPECIALTO DECIDE DEBATE TO FEED FOR IEA OIL RELEASE COAL GRAPPLESCHINA’S ENERGY WOES NOW OIL —————————- ENERGY AGENCYWOES DEMAND FROM GOLD, GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF RESERVESRELEASERELEASE DOLLAR GOLD PRODUCERS INVESTOR, ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011

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Commodity markets are focused on the economy of China, the WHAT WILL HAPPEN TO THE OIL PRICE? world's second biggest oil consumer, as a major source of fuThe IEA has said its release helped to narrow a price gap beture demand growth. tween better quality oil and more difficult-to-refine crudes.

Q+A-What next after IEA decision not to release more oil?
By Barbara Lewis and Emma Farge LONDON, July 21 (Reuters) - The International Energy Agency said on Thursday it was not releasing further oil from emergency stockpiles for now, but stood ready to act again if needed. The following looks at some of the questions raised so far by the IEA's action. The group, which brings together 28 industrialised energyconsuming nations on June 23 announced the release of oil from emergency stocks and said it would review that decision by the end of this week. COULD THE IEA DECIDE ON A FURTHER RELEASE LATER THIS YEAR? Analysts who agreed there was no need for a further release yet say there could be a case for dipping further into emergency stocks later this year when demand will rise during the northern hemisphere winter. Following the loss of Libyan production, which stood at around 1.6 million barrels per day (bpd) before civil war erupted this year, both the IEA and OPEC had signalled a gap of roughly one million barrels per day between OPEC output and demand for the group's oil. On Thursday, the IEA said the oil market would be bettersupplied for the rest of 2011 following the emergency release and extra OPEC supplies. Even without a further release, another 20 million barrels or about one-third of the IEA's original supply injection of nearly 60 million barrels, could still trickle onto the market either through official country tenders or bilateral sales. Any decision on a future release is likely to depend on when Libyan crude oil exports resume, analysts said. "As long as a Libyan supply gap remains, a second release will continue to be on the table," said J.P. Morgan analyst Lawrence Eagles. COULD THE U.S. RELEASE RESERVES UNILATERALLY? In explaining its use of emergency stocks, traditionally kept for times of severe shortage, the IEA has placed prime emphasis on the loss of Libyan barrels, although it also cited economic weakness. The United States is seen as particularly anxious about the economic implications of high oil prices in the runup to a presidential election. Some analysts consider it could unilaterally release oil from its Strategic Petroleum Reserve in the event it cannot convince the IEA as a whole to act. "One thing I could not rule out is a further release of SPR and I think this is a valid response as there is concern about tightening in the third and fourth quarters," said Tony Duet, chief investment officer at Duet Commodities. The United States was responsible for half of the June release and its high-quality SPR crude, similar to that pumped by Libya, was seen as a very useful addition to the market. In Europe, where many were said to be far less convinced of the need for action, much of the stock released comprised products or heavier crudes, such as Iranian barrels offered by Germany.

Light, sweet West African benchmark grades have fallen to eight-month lows this week. Traders said the IEA release had also helped to slow the rally in North Sea grades spurred by supply disruptions. At the same time, some refiners enjoyed increased profits as the cost of their feedstocks decreased. Overall, futures markets, with Brent over $118 a barrel on Thursday , are still above levels immediately before the IEA release, although some analysts say the possibility of further action could be curbing trader activity. Others saw the potential for prices to rally sharply as finite levels of consumer stocks might struggle to compensate for the loss of oil from Libya, which the IEA has predicted will not begin to flow again until late next year. Equally, no-one can rule out the possibility of further unexpected disruptions, for instance because of the U.S. hurricane season. "What they've done is release six weeks' worth of Libyan oil but the problem hasn't gone away," said Duet. "I think the release is a bullish signal but only in a few months' time. They are kicking the can further down the road. It will weigh on prices in the short term but increase velocity of the move up in future." COULD IRAN, SAUDI RIVALRY DENT THE PRICE? Saudi Arabia and its Gulf allies were said to have been informed of the intention to release strategic reserves and were not necessarily violently opposed given their concern about the impact of high prices on oil demand. The Arab Spring has challenged Saudi Arabia's relationship with the United States, which Saudi Arabia considered abandoned Egypt's toppled ruler Hosni Mubarak, regarded as a crucial regional ally against the rise of Shi'ite Iran. At the same time, Saudi Arabia cannot afford to lose U.S. backing against Iran, its biggest regional foe. Already-bad Saudi-Iranian relations have deteriorated over Bahrain, where the Shi'ite majority has protested against the country's minority Sunni rule. Sunni-led Saudi Arabia might calculate countenancing further U.S./IEA reserves releases is a price worth paying. And although the Arab Spring has raised the oil price needs of many OPEC members as they have increased social spending to try to quell unrest, Saudi price requirements remain lower than Iran's, analysts say. After Iran -- OPEC's second biggest exporter after Saudi Arabia -- led opposition to Riyadh's proposal to increase output at the June OPEC meeting, Saudi and its Gulf allies increased suppplies regardless of the lack of formal OPEC sanction. They could fight for market share and offer their crudes at discounted rates into the market. So far, however, Asian refiners, for instance, are saying both Saudi and Iranian crudes are too expensive. Saudi Arabia has always said its policy is to supply the amount of crude the market needs and to seek a moderate prices acceptable for producers but not so high it destroys consumer demand.
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2011.8 million bpd in June." The official declined to specify the breakdown of crude and product stockpiles. The group demonstrated record levels of discipline in curbing output in early 2009 after agreeing its biggest ever production cut in December 2008 when oil prices crashed below $40 a barrel." a ministry official said. July 22 (Reuters) . Richard Batty of Standard Life Investments drew a contrast between the 48 percent gain in GDP across OPEC countries between 2006 and 2010 and the economies of consumer countries. according to a senior OPEC delegate. although the ministry initially expected oil firms to draw down mostly oil products. ITALYAMID ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO HOVER OIL YET PDF ON WITHSECOND OIL ON SEVERE POWER INTERNATIONAL MAY ECONOMIC GAS CHINA SHINES THE RACE HIGHS ONRELEASE SPECIALTO DECIDE DEBATE TO FEED FOR IEA OIL RELEASE COAL GRAPPLESCHINA’S ENERGY WOES NOW OIL —————————. noting that producers had boosted supplies. The relaxed requirement had a greater than expected impact on reserves.IEA RELEASE FURTHEROPPOSE ANDENERGY NEEDS INENERGY DEMAND GERMANY. IEA Executive Director Nobuo Tanaka on Thursday said Saudi Arabian output would rise to 10 million barrels per day (bpd) in July. WHAT HAPPENS IF THE EXTRA OIL LEADS TO A PRICE COLLAPSE? An oil price collapse would be almost guaranteed to reunite a divided OPEC. a three-day reduction. The most recent OPEC statistics showed the positive impact rising prices had on member countries in 2010. with effect for one month. until July 26.42 million kl. In comment that could be interpreted as handing the initiative back to Saudi Arabia. with commercial reserves of crude and oil products falling by 1. Japan last month relaxed reserve requirements for refiners and importers to 67 days' worth of consumption. as concern grew that high oil prices were hurting a fragile global economy.26 million kl (7. ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE WHAT IS THE STATUS OF OPEC-IEA RELATIONS? OPEC officials and delegates criticised the IEA's intervention. even before the rally gained further momentum this year.9 million barrels) during the two weeks to July 16. "For oil importing nations such as the U. That follows on from 9.9 million bbl) reduction. Although developed economies have reduced their energy intensity. A security officer patrols the entrance to the Engen refinery in Durban as workers continue striking for a second week. reflecting the effects of the recent financial crisis and recession along with the negative terms of trade effects of importing good and services. Japan extends relaxed oil reserve rule after IEA request TOKYO. 31. most notably oil. compared with the target of a 1. The IEA said on Thursday it would not release further strategic government stockpiles held by industrial consumer nations for now. REUTERS/Rogan Ward . The reserve reduction was part of a coordinated release of 60 million barrels of emergency stockpiles by IEA members. Labour unions are demanding a 13% increase in wages as well as the banning of labour brokers. high oil prices are still considered a major problem in times of economic crisis for consumer countries and a boon for the producers. although they have since rebounded.42 million kilolitres (8. With the release of 1. GDP was up just 9 percent over the same period. we think we have achieved our role as part of the collective release. "IEA says there would be adverse effects if we replenish stocks quickly." said Batty..Japan's trade ministry extended a relaxation of commercial oil reserve requirements until Dec. which could curb output to try to force prices higher again.S. July 18. so I think stockpiles will be restored gradually (by the end of this year). GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF RESERVESRELEASERELEASE DOLLAR GOLD PRODUCERS INVESTOR. The move triggered a short-term 10 percent drop in crude oil prices.ENERGY AGENCYWOES DEMAND FROM GOLD. in line with a request by the International Energy Agency that member countries not move too quickly to replenish strategic stockpiles drawn down in recent weeks in a collective move to stabilise the market.

"You just need to see what happened." he told a press briefing. Graphic on Saudi production: ( http://r. on his last official trip before his term ends on Aug.There are no plans for now for a coordinated second release by the International Energy Agency (IEA) of emergency oil stocks. (Continued on page 6) . BOOSTING SUPPLIES The IEA is aiming to complete consultations with all 28 member countries by July 23 and decide whether to draw further from emergency stocks. and on hopes of progress in debt talks on either side of the Atlantic." Saglia told Reuters. The latest oil market report suggested that the growth in the call on OPEC crude and stock change exceeded 1 million bpd in July. The IEA in June announced a release of 60 million barrels from emergency stockpiles for one month .S." Tanaka said. The agency was also checking for how long top exporter Saudi Arabia would continue to increase output. The IEA in June announced a release of 60 million barrels from emergency stockpiles for one month . Gulf of Mexico.the third such move in the agency's history . He said many market participants expect the kingdom to keep output at higher levels in July. which needs the backing of all 28 members if it is to pour more oil into a volatile crude market. the IEA announced a release of 60 million barrels from emergency stockpiles for one month . Germany and Italy are expected to oppose any second release of emergency oil reserves by the IEA because they were not much in favor of the decision in June. "Whether to release further or hold on to wait and see is a matter of decision" by member countries. The release in June also followed the failure of leading OPEC member Saudi Arabia to convince the group to increase supplies.com/gyb89r ) In defiance of a refusal by the Organization of the Petroleum Exporting Countries to back an output rise. French min says "nothing is planned" for IEA release PARIS. a large part of the over 1 million bpd would be covered by the release. Tanaka also said the IEA has enough oil to take a step as the last one for 24 months more if necessary. "That's why we are saying the release has had a positive impact. INDUSTRYCONFERENCE IN KUALA LUMPUR WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE IEA yet to decide on second oil release -Tanaka By Risa Maeda TOKYO. executive director Nobuo Tanaka said on Tuesday. a senior Gulf OPEC delegate told Reuters.The International Energy Agency has not yet decided whether member countries would conduct a second release of emergency oil reserves. The agency is also assessing how much of the oil it decided to release last month had reached the market. In June. 31.in a temporary measure to fill a supply gap caused by disruptions in Libyan output. but I think more than half of the over 1 million bpd is covered by our stock release. July 19 (Reuters) . GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF AMID ASIA OIL ANDENERGY NEEDS INENERGY DEMAND GOLD PRODUCERS INVESTOR.in a temporary measure to fill a supply gap caused by disruptions in Libyan output. "Nothing is planned." Tanaka told Reuters on the sidelines of a seminar in the city. The release also followed the failure of leading OPEC member Saudi Arabia to convince the group to increase supplies. The estimate did not include IEA's stock release and if it did . traders and analysts say. sources have said.the third such move in the agency's history .com/xad99r ) Oil consumption by region: ( http://r. By Alberto Sisto "In a preemptive move to avoid a serious risk scenario. "The measure doesn't convince us but in the end we won't oppose it.in a temporary measure to fill a supply gap caused by disruptions in Libyan output.IEA RELEASE FURTHER SECONDFEED FORSHORTAGES BALIRESERVES SAYS NO HOVER ECONOMIC YET PDF ON WITHOIL ON SEVERE POWER INTERNATIONAL THE RACE HIGHS GAS CHINA SHINES ENERGY ENERGY WOES NOW SPECIALTO DECIDE DEBATE TO OILONRELEASE OIL COAL GRAPPLESCHINA’S AGENCYWOES DEMAND FROM —————————.S." he said. stockpiles data showed larger-than-expected drops in crude inventories. Tanaka said. A French government source said last week Italy and Germany were expected to oppose any second release of emergency oil reserves by the IEA. which hit 9.the third such move in the agency's history .Italy will not formally oppose a release of emergency oil stocks by the International Energy Agency (IEA) though it is not convinced by the strategy. Italy would not block emergency IEA oil release ROME.8 million bpd in June. The IEA's oil market report released last week showed Saudi Arabia had raised output by 700. prices rose again. The only other release in the 37-year history of the IEA was at the time of the first Gulf War. Tanaka told the seminar. There is no sign yet of the kind of shortage to mandate another dip into the West's emergency oil reserves when a 30day deadline for assessing the impact of the first release expires at the end of this week. a sign supplies in the market are tight. Oil consumption by region:( http://r." The previous release by the IEA was in 2005 when Hurricane Katrina devastated oil infrastructure in the U. Saglia said Italy did not believe releasing emergency stocks would have any durable effect on prices. July 19 (Reuters) . Before announcing the latest emergency release . Tanaka also said. the IEA had held consultations with the kingdom and received a pledge from the OPEC leader that it would keep output at raised levels. as soon as the reserves were built up. but we don't exclude anything.reuters. we released our reserves and we understand the release was a success for now. IEA's Executive Director Nobuo Tanaka told Reuters the agency had not yet decided whether member countries would conduct a second release of emergency oil reserves.com/gyb89r ) On Tuesday. said Tanaka. July 20 (Reuters) . Junior Industry Minister Stefano Saglia said on Wednesday. Oil rose over a dollar on Wednesday after weekly U.reuters. "Our assessment on how and how much our released oil is entering the market in July is still on. French Energy Minister Eric Besson said on Tuesday. IEA Executive Director Nobuo Tanaka told Reuters in Tokyo on Tuesday the agency has not yet decided whether member countries would conduct a second release of emergency oil reserves.000 bpd in June from a month earlier. he said.RESERVESRELEASERELEASE DOLLAR GOLD.reuters. he added. Saudi Arabia independently increased its output.

In defiance of the Organization of the Petroleum Exporting Countries' refusal to back an output rise. the IEA found a gap of around one million bpd between expected OPEC production and anticipated demand for its oil." said Sadad al-Husseini. Analysts from across the producer-consumer divide agree that does not mean another release will not happen this year. to meet domestic demand for power. a French government source told Reuters last week. IEAHOVER ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO YET PDF ON MAY SECOND OIL GAS DECIDE DEBATE HIGHS ON SEVERE POWER INTERNATIONAL THE DECIDE FEED FOR IEA OIL CHINA SHINES YET IN ECONOMIC ONRELEASE RELEASE SPECIALTO ITALY ENERGY ENERGY WOES NOW OIL COAL GRAPPLESCHINA’S AGENCY TOBOOMING ASIA —————————.8 million barrels per day (bpd) in June. REUTERS/Enrique De La Osa . which provided 30 million barrels of the June 23 release. "By year-end.RESERVES TO ANOTHER DEMAND FROM GOLD. the situation will be different. it would take an even bigger shock than last month's nearly 60 million-barrel supply injection to have a significant impact on prices of more than $116 a barrel for Brent crude.IEA RELEASE FURTHEROPPOSE ON WOES SHORTAGES BALIRESERVES GERMANY. (Continued on page 7) Men work at an oil pump near the coast on the outskirts of Havana June 10. Saudi Arabia independently increased its output. GLITTERSON TORACERELEASERELEASE DOLLAR SILVERSILVEROF AMID NEAR ASIA'S SECOND NEEDS INENERGY DEMAND GOLD PRODUCERS INVESTOR. to convince the group to increase supplies. it would have to be endorsed by all 28 members of the energy consumer body. traditionally a price moderate and U. averaging nearly 600. The IEA in a monthly report last week made a case both for more action and inaction. ally. traders and analysts say. Some do not even rule out unilateral action by top oil consumer the United States. Germany and Italy are likely to resist any plans for a second release for now. And now the market has learnt to brace for the unexpected. a senior Gulf OPEC delegate told Reuters.There is no sign yet of the kind of shortage to mandate another dip into the West's emergency oil reserves when a 30-day deadline for assessing the impact of a first release expires at the end of this week. an oil analyst and former top official at state oil giant Saudi Aramco.000 bpd. "We don't see a strong response to the incremental Saudi oil offerings and that must mean that the market cannot absorb any additional oil supplies at the current prices. ANDENERGY OIL RELEASE WITHOIL WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE No need for more IEA oil reserves yet By Barbara Lewis and Muriel Boselli LONDON/PARIS. 2011. analysts said. It noted Saudi Arabia was this year burning record amounts of oil. In common with a report from OPEC. July 18 (Reuters) . "The IEA will undoubtedly repeat the release of oil from inventory in the last quarter of 2011 but probably not again this summer.S. Not all of that will make it to international markets. For another International Energy Agency release to take place." The IEA's announcement of emergency supplies in June followed the failure of leading OPEC member Saudi Arabia. which hit 9. This is because supplies will again be lagging demand and will remain so over the next two years.

"While it's not a foregone conclusion. energy official who runs energy consulting firm Rapidan Group. Gulf of Mexico. The IEA said slightly less than the 60 million barrels initially announced would be released. officials were likely to seriously consider pushing the IEA to release more oil. which accurately predicted the first measure. have to act soon. the only other release in the 37-year history of the IEA ing with the backing of OPEC as a whole." he said. But in Europe. who used to "To get the crude out to the market in September. ITALYAMID ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO HOVER OIL YET PDF ON WITHSECOND OIL ON SEVERE POWER INTERNATIONAL MAY ECONOMIC GAS CHINA SHINES THE RACE HIGHS ONRELEASE SPECIALTO DECIDE DEBATE TO FEED FOR IEA OIL RELEASE COAL GRAPPLESCHINA’S ENERGY WOES NOW OIL —————————. it would be more was at the time of the first Gulf War.S. meet the supply shortfall left by the loss of Libyan barrels to The IEA's report said inventory levels had dropped." The United States is seen as particularly keen for lower oil prices in the run-up to a presidential election and when the economy is fragile. (Continued on page 8) . PRE-EMPTIVE ACTION? That does not suggest an immediate crisis.IEA RELEASE FURTHEROPPOSE ANDENERGY NEEDS INENERGY DEMAND GERMANY. a former White House For him the most likely outcome of this week's review would be a statement the IEA would continue to monitor the situation. but some analysts saw an argument for pre-emptive action before the peak demand final quarter of the year. asked about a possible further release.ENERGY AGENCYWOES DEMAND FROM GOLD. high levels of tax mean consumers are more This time. Just as Saudi Arabia might have been more comfortable actTo date. The IEA has said its reserves release is primarily designed to noted not all of the reserves had been "fully utilised". He took the view U. although it has also mentioned a need to protect the onshore stocks at the end of June "close to five-year average economy. they would work for the IEA. especially as incremental "They have given themselves justification to do just about any. but so far the take-up rate had been higher than after its previous release in 2005 when Hurricane Katrina devastated oil infrastructure in the U. taking civil war. "It's hard to pull the trigger again on another release when you don't know how much of what's already been released has been taken up. it's a good possibility. "The odds of another release are much higher than the oil market expects.S." refiners. while the United States convenient for the United States to work within the IEA frameon rare occasions has independently released oil from its Stra. ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE But it also said the June release had helped to narrow a pricing gap between high-quality. levels" after many months of being substantially higher than historical levels.Saudi Arabian oil tends to be heavy and unsuitable for some thing they want. tegic Petroleum Reserve." said Bob McNally.work. easy-to-refine crude and heavier grades. government official." he said. light. but a German tional markets. an analyst at Societe Generale. all of the 30 million barrels made available by the resigned to high prices and less sensitive to rises on internaUnited States has been sold into the market. GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF RESERVESRELEASERELEASE DOLLAR GOLD PRODUCERS INVESTOR. even if the overall oil price has bounced to higher levels than before the IEA supply injection. I'm sure it will be a lively debate internally. said Mike Wittner.

reuters.000tonne aframax tankers from Southeast Asia to East Coast Australia eased to W97. ITALYAMID ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO HOVER OIL YET PDF ON WITHSECOND OIL ON SEVERE POWER INTERNATIONAL MAY ECONOMIC GAS CHINA SHINES THE RACE HIGHS ONRELEASE SPECIALTO DECIDE DEBATE TO FEED FOR IEA OIL RELEASE COAL GRAPPLESCHINA’S ENERGY WOES NOW OIL —————————. Asia Tankers-Crude freight rates to ease ahead of IEA decision By Randy Fabi SINGAPORE. "Any additional IEA strategic oil inventory release could preempt the needed OPEC production increase and delay the anticipated recovery in tanker demand. GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF RESERVESRELEASERELEASE DOLLAR GOLD PRODUCERS INVESTOR. releasing crude oil is only part of the answer." said Neil Atkinson of Datamonitor.21 from $32. Cambodian Prime Minister Hun Sen announced last week the country is expected to produce its first oil by December 12.50 last week.85 on Monday from W49.86 from W147. analysts said it needs to do much more -. July 19 (Reuters) . "Also.IEA RELEASE FURTHEROPPOSE ANDENERGY NEEDS INENERGY DEMAND GERMANY. analyst with Edmond de Rothschild Asset Management.reuters.09 last week. In the intra-Asia market. CRUDE Rates on the benchmark Very Large Crude Carrier (VLCC) export route from the Middle East to Japan rose to a over twoweek high of W49. according to Meiwa International.and even then. Gas oil could also strengthen with Indonesia buying more supplies to meet seasonally strong demand ahead of the fasting month in August. when a 30-day deadline for assessing the impact of a first release expires. REUTERS/Samrang Pring .reuters. A vendor holds a bottle of gasoline to refuel a motorcycle along a street at the outskirts of Phnom Penh July 18. "A sluggish start to the week with little fresh enquiry as charterers hold back as the few remaining cargoes from last week are picked off.000-tonne crude tankers from West Africa to China edged up to W47." said Douglas Mavrinac. Oil companies are operating off Cambodia but the country is not expected to produce its first oil until 2012. It would have had a much better chance of holding the oil price lower had it. PRODUCTS Clean rates for Long Range (LR1) tankers on the benchmark TC5 Middle East to Japan route rose to a two-week high of W124. Fuel oil is likely to continue on the uptrend that started from the end of last week.81 on Monday from W121." said broker firm ICAP.com/xew32s) ( http://r.com/xuv62s ) The Baltic Exchange's rate for 260. For clean tankers.07 last week." For a PDF of Reuters reports on this topic: ( http://link. please click on: ( http://r. dampening freight demand.39 last week. but if the market remains quiet it could easily slide back to W120 levels." he said." said Chris Weafer. two more than in June. market reaction would be very hard to predict. after weakening unabatedly for the last two weeks.67 from W47. Demand for VLCCs to transport crude oil remained strong in the Middle East with 124 fixtures for July loading so far. If the IEA's aim is to lower prices to protect the world economic health.ENERGY AGENCYWOES DEMAND FROM GOLD. "There are enough commercial stocks around and even though we expect them to fall in the coming months.03 last week. "I think that the IEA has now lost the initiative in the market. medium range (MR) tankers travelling from Singapore to Japan eased to W146. The clean tanker market could find support from rising demand for fuel oil and gas oil in Asia.Rates for crude oil tankers on key Asian freight routes are expected to ease this week on fears industrialised nations will release more emergency reserves.33 from W97. as the August pricing month starts.31 last week. according to local media. 2012. It is products that count for end-users and unless crude is refined it is merely transferred from one stock holder to another. The market has hovered near levels seen in early March for the past six weeks. but rebounded swiftly. 2011. Oil prices initially dropped around 6 percent . analyst for Jefferies & Company. for example. shipbrokers said on Tuesday. "The first exercise has shown us that to achieve a significant and sustained fall in the oil price a much bigger intervention by the IEA is required. released more oil the following week. The market has traded in a tight range near two-month lows for the past two weeks. The Baltic Exchange's rate for South Korea to North America's West Coast edged up to a two-month high of $32. said Emmanuel Painchault. ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE Only output disruption from another significant oil producer would warrant another release at this point. The IEA is expected to confer with member countries by July 23. Rates for 80. awaiting news on whether or not the International Energy Agency will approve a second release of emergency oil reserves. rates are seen slightly higher on rising Asian demand for fuel oil and gas oil. this does not justify exaggerated interventionism.com/jac42s ) For related graphics.36 last week." ICAP said. chief strategist at Uralsib in Moscow. "The market is expected to remain around W125 on the back of the activity of last week. The market hit a 2011 low of W47.

In addition. but neither would it press for a further release. ITALYAMID ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYS NO HOVER OIL YET PDF ON WITHSECOND OIL ON SEVERE POWER INTERNATIONAL MAY ECONOMIC GAS CHINA SHINES THE RACE HIGHS ONRELEASE SPECIALTO DECIDE DEBATE TO FEED FOR IEA OIL RELEASE COAL GRAPPLESCHINA’S ENERGY WOES NOW OIL —————————. says U. it's a good possibility.8 million bpd in June. Bob McNally. who has since been deeply involved in talks to avert a looming U.Germany and Italy are expected to oppose any second release of emergency oil reserves by the International Energy Agency. Otherwise has warned of potential supply shortages. I'm sure it will be a lively debate internally. government default. ference to high oil prices given the strength of its economy." the French government source said. only the third such move in its history. which provided half of the initial supply injection. Italy may resist 2nd IEA oil release By Muriel Boselli PARIS. averaging nearly 600. which a senior Gulf OPEC delegate said hit around 9." Whether the IEA or its member states will intervene again in the hopes of buffering a fragile global economy is the subject of intense speculation in oil markets.S. A monthly report from the IEA this week "took a resolutely positive view" of its action so far. Asked whether they would resist this time." said. Some analysts." said Cameron Ramos for the Department of Energy and Climate Change. while analysts have said Germany's appestocks after its announcement last month of a 60 milliontite for further action could be tempered by its relative indifbarrel release. have said the tactic was designed to lower oil prices at a time of global economic weakness and there was also a political element in the run-up to the U. "Germany and Italy were not much in favor of the decision The IEA has presented its use of strategic stockpiles primarily back in June. the source said: "This is likely. (Continued on page 10) . Immediately after the June announcement.S." within the IEA framework." said Mike Wittner. saying it was waiting for the IEA's opinion. If there is a second release. oil prices dropped by around 6 percent." OPEC member Libya's barrels to civil war. noting the first reserves announcement was a shock to oil markets. the most likely outcome of next week's 30-day review of the IEA's emergency reserves release would be a statement saying the agency would continue to monitor the situation. it would likely be announced by the end of July so that the barrels could be primed to hit world "This does not mean the move will not be repeated but this is markets before the end of the third quarter. but they quickly bounced back and Brent was trading above $116 a barrel Friday. the United States. "They (the IEA) have given themselves justification to do just about anything they want. "We will wait for the IEA to conclude their analysis at the end of July and they will make a decision in light of that. on rare occasions. They've only used one so far. about Germany's stance. "While the as a response to the supply shortfall created by the loss of decision was unanimous not all were committed. But the monthly market report also signalled a continued supply gap of around one million barrels per day (bpd) between the amount of oil the Organization of the Petroleum Exporting Countries is pumping and the demand for its crude. which it said had narrowed the price gap between high-quality.IEA RELEASE FURTHEROPPOSE ANDENERGY NEEDS INENERGY DEMAND GERMANY. however. which were immediate responses to sudden rather than ongoing supply disruption. providing potential justification for more oil. It is not a tool for markets. They say it differed from the two other releases in the IEA's 37-year history." he said. He thought. EUROPEANS QUESTION NEED FOR INTERVENTION France would not lead any opposition. "While it's not a foregone conclusion. however. There could be objections on the principle that emergency reserves should not be used for intervening in markets. his top economic advisor.ENERGY AGENCYWOES DEMAND FROM GOLD. "The odds of another release are much higher than the oil market expects. easy-to-refine oil and heavier. it said leading exporter Saudi Arabia's domestic use of fuel to generate power was likely to hit record levels. a second injection of liquidity has not been discarded offhand. July 15 (Reuters) . "I think from the beginning there were always two Even though a unanimous decision is needed for a release bullets in the chamber.000 bpd. The French government source said Italy's opposition to a The IEA is expected to confer with its member countries by further supply release was in part based on its historic relaJuly 23 to decide whether to draw further on emergency oil tionship with Libya." he said. The United States has. even if the price impact was not sustained. could act unilaterally as it has done via SPR loans a handful of times in the past. and Britain took a similar line.potentially providing an argument to do nothing further for now. Analysts still rule nothing out. The Obama administration's first decision to release oil from the reserves was coordinated by Gene Sperling. a period when IEA an operation which is and must remain exceptional. which needs the backing of all LIMITED MARKET IMPACT 28 members if it is to pour more oil on a volatile crude market. more sulphurous grades -. however. And the IEA's own oil market report this week forecast a gap in global oil supplies for the third quarter. European sources say that despite resistance from Italy and Germany. a former White House energy official who runs energy consulting firm Rapidan Group. The official was noncommittal. officials are likely to seriously consider pushing the IEA to release more oil. ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE Germany. dipped into its stocks unilaterally. an analyst at Societe Generale who previously worked at the IEA." said a European diplomatic source. which accurately predicted the first measure." he told Reuters. GLITTERSON IN NEAR ASIA'S TOBOOMING ASIA SILVERSILVEROF RESERVESRELEASERELEASE DOLLAR GOLD PRODUCERS INVESTOR. But doing so would require it to take time away from another even larger crisis. A German government official Friday said not all the reserves released so far had been used when asked whether the IEA should add further oil to the market.S. Rapidan's McNally it loses its value. Higher domestic demand would limit the amount for sale on international markets from a rise in Saudi oil production. presidential election. "It's hard to pull the trigger again on another release when you don't know how much of what's already been released has been taken up. "This is not an operation (the oil stock release) that can be repeated indefinitely. the French government source told Reuters.

the release successfully provided liquidity over the summer when the supply of sweet crude was severely disrupted by North Sea maintenance programmes and the conflict in Libya. GLITTERSON IN NEAR ASIA'S TOBOOMING OIL FROM SILVERSILVEROF RESERVESRELEASEMARKNOW ASIA GOLD PRODUCERS INVESTOR. (Continued on page 11) A drilling rig in the Eagle Ford Shale in South Texas is seen in this Petrohawk Energy Corporation handout photograph released to Reuters on July 14. In the absence of a release.S. Forties. 2011. ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE COLUMN-IEA succeeded in providing temporary liquidity: John Kemp (John Kemp is a Reuters market analyst. It almost certainly averted a panic about the shortage of benchmark grades that would have risked a severe price spike at a time when the global economy appears unusually fragile. The Sep/Oct spread has fallen from 32 cents before the announcement to around zero in recent days." as analysts from Barclays Capital explain in a recent note. The views expressed are his own) LONDON. natural field declines coupled with an unusually heavy summer maintenance programme will cut output from the four streams on which Brent futures are priced (Brent. The fact the counterfactual is unobservable does not make it any less relevant. Market participants remain concerned about the shortage of North Sea crude production in August. up from 45 cents prior to the IEA announcement. fears about the availability of light sweet crudes would probably have triggered a panicdriven price surge. In fact the IEA release coupled with Saudi Arabia's agreement to increase output has taken the spreads back to levels recorded at the start of the year before the loss of Libyan production. While the Aug/Sep timespread flared out to more than $2. the lowest level since 2007. with attendant risks to the recovery.pdf).000 barrels per day in August. implying market participants believe the stock release will play a crucial role in preventing tightness in the supplydemand balance lasting through the end of the year. other timespreads fell sharply and have stayed low. Mining and oil company BHP Billiton unveiled a $12.The International Energy Agency's decision to order the release of 60 million barrels from emergency oil stocks remains fiercely controversial. "Ultimately. gas producer Petrohawk Energy Corp on Friday.GERMANY. but on balance it should be considered a success. July 15 (Reuters) . imagine how severe concerns would have been if the IEA had not released stocks. the IEA's emergency stocks are not a substitute for production. prices for August crudes would almost certainly have risen much higher. TEMPORARY LIQUIDITY The IEA's release may not have been able to prevent tightness in the market at the end of the summer completely. REUTERS/Petrohawk . and convinced participants shortfalls will be confined to a few weeks in August. Central bankers and investors have good reason to offer thanks to the agency for averting a much worse outcome. not leave the market persistently short into the autumn and the winter heating season. Without the comfort provided by the stock release. Like commercial inventories.1 billion agreed takeover of U. the IEA release will have to be judged subjectively in the answer to the impossible question of how different prices prove to be relative to the unobservable counterfactual case in which there was no release.com/ ce/BRENT-SPREADS1. but it does seem to have contained the fears. COUNTERFACTUALS Critics charge the IEA release was futile because spot prices quickly returned to levels observed before the announcement. Reduced output from the North Sea together with the ongoing loss of Libyan exports and the expected rise in refinery throughput to meet summer driving demand pushed prices for August Brent futures to a steep premium of more than $2 per barrel over September when the August futures contract expired on Thursday (http://graphics. If the market was that concerned about the shortage of sweet crudes with the stock release. There are plenty of reasons to think the market would have become exceptionally tight over the late summer. The stock release appears to have performed that role admirably well. They exist to dampen damaging short-term volatility. Many of the agency's harshest critics argue the release failed to achieve a lasting price reduction (economist Albert Hirschman's futility thesis) undermined its future credibility (the jeopardy thesis) and blunted price signals (the perversity thesis). But critics are judging the release against the wrong criteria. But more than half of the reduction came after the IEA announcement. marking the Anglo-Australian firm's biggest step into the booming shale-gas industry. ITALYAMID ASIA OIL ANDENERGY NEEDS INENERGY DEMAND IEA RELEASE FURTHEROPPOSEINDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON WITHSECOND OIL YET RELEASE MAY ECONOMIC RELEASE OIL OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL PASSES ENERGY GAS CHINA SHINES THE RACE HIGHS WOES SPECIALTO DECIDE DEBATE TO FEED FOR IEA DOLLAR COAL GRAPPLESCHINA’S AGENCYWOES DEMAND —————————. As my colleague Robert Campbell has noted. Spreads had been softening since Saudi Arabia indicated it would boost supplies by up to 1 million barrels per day following the breakdown of the OPEC meeting on June 8. But this is the wrong comparison. It is hard to see how the stock release could have achieved much more. In its own terms.thomsonreuters. But the release combined with higher Saudi output has convinced most the shortfall will be confined to a single month and not cause a legacy of tightness in September and beyond.ENERGY HALFWAYONRELEASE RELEASE GOLD. Oseberg and Ekofisk) to less than 900. most of which will become available in August. The correct comparison is not between prices before and after the stock release but between prices after the release and what they would have been if the release had not happened.

downside pressures from higher-than-expected oil prices also represent a risk to the forecast.000 barrels of crude oil available. According to the IEA. head of the IEA's oil industry and markets division. ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE World oil demand to strain supply in 2012-IEA By Alex Lawler and Barbara Lewis LONDON. A total of 19. It said demand for OPEC crude would average almost 31 million bpd in the second half of this year. short within the next 10 years after new European requireSaudi Arabia. the IEA report added to evidence that core Britain's Department of Energy and Climate Change said this members are pumping more crude." the spokesperson said.Chevron wants UK level playing field in IEA alised countries.20 million bpd.U. the IEA said. Critics have described the IEA programme as disorganised. and OPEC's oil production capacity would struggle until Libyan output began to recover. In its first 2012 forecast in a monthly report. Fyfe said the IEA had yet to decide whether it would release more supplies and reiterated it would make a decision 30 days after the initial announcement on June 23.8 million bpd cited by a senior Gulf OPEC delegate on Tuesday. adding to the pressure on available supplies. trading at $117 a barrel on Wednesday. government agencies to ensure a level playing field that allows a sustainable return on investments wherever we operate. release Differences between the Organization of the Petroleum Exporting Countries and consumer nations widened after the 12member OPEC in June failed to reach a deal on a Saudi-led proposal to increase output. OPEC production in June increased by nearly 850.reuters. In response. The company also did not say whether it would have preferred the volumes to have been released via a Dutch or Germanstyle tender.000 bpd.ENERGY HALFWAYONRELEASE RELEASE GOLD. contradicting a more conservative outlook from producer group OPEC. the IEA trimmed its 2011 global demand growth estimate by 70.7 million bpd in June. the IEA decided to release oil from emergency stocks for only the third time since it was founded in 1974 to fill the gap in supplies left by the disruption to Libya's output. with methods varying from country to country. a spokesperson told Reuters on Friday. meant that sales have been left to the discretion of oil firms While OPEC did not formally agree to boost its supplies at last that have no obligation to tender or sell it. Chevron declined to comment on how strategic stock positioning had been handled in the UK.GERMANY.reuters. Britain was one of 12 European countries told by the IEA to make emergency crude and refined products available to help temper high oil prices." said the Paris-based IEA. By Jessica Donati LONDON. unlike the system in other countries such as Germany. GLITTERSON IN NEAR ASIA'S TOBOOMING OIL FROM SILVERSILVEROF RESERVESRELEASEMARKNOW ASIA GOLD PRODUCERS INVESTOR. oil major Chevron hopes for a commitment by UK regulatory and government agencies to ensure a level playing field under the terms of the International Energy Agency (IEA) stock release plan. OPEC said the use of stocks had had no impact. which advises 28 industri. saying the figures on volumes were commercially sensitive." David Fyfe. Overall.47 million barrels per day (bpd) to 91 million bpd. around 1 million bpd more than OPEC produced in June.8 million bpd in the first quarter of next year. week it was considering setting up a central oil stockholding The IEA said OPEC output rose significantly in June following body following a warning that emergency stocks could fall a unilateral supply increase from the group's leading exporter. "The point of the stock release was to add some liquidity and flexibility into the market. and say this has created confusion in the market.32 million bpd expected by OPEC and lower than a forecast from the United It did not expect a Libyan recovery to happen until the end of States' Energy Information Administration. The IEA's 2012 prediction was more than the 1. In the report. "Chevron hopes for a commitment by regulatory. around 33. ments next year set higher storage obligations. since the lack of a central stockholding body has weaker economic outlook for developed economies.4 million barrels of refined product and 600. The IEA on Wednesday maintained the stocks move had added supply of high-quality crude to a tight market and the agency took "a resolutely positive view" of the strategy so far. July 8 (Reuters) . citing the impact of high prices and a Many traders do not expect UK reserves to be released from storage. The agency also trimmed its estimate of demand growth this year to 1.2 million barrels was to be released in Europe either through tenders or by reducing minimum storage requirements. Britain's emergency fuel stocks are held by individual companies and not by a central body. (Continued on page 12) . told Reuters Insider. The regulatory agency asked Britain to make around 2.000 bpd compared with May. "Aside from economic growth. Oil . Reuters Insider interviews with IEA and Jim Rogers: ( http://link. ITALYAMID ASIA OIL ANDENERGY NEEDS INENERGY DEMAND IEA RELEASE FURTHEROPPOSEINDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON WITHSECOND OIL YET RELEASE MAY ECONOMIC RELEASE OIL OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL PASSES ENERGY GAS CHINA SHINES THE RACE HIGHS WOES SPECIALTO DECIDE DEBATE TO FEED FOR IEA DOLLAR COAL GRAPPLESCHINA’S AGENCYWOES DEMAND —————————. month's meeting. the International Energy Agency said on Wednesday. It expects all of the 2012 and said OPEC capacity would fall to a low point of growth next year to come from emerging economies. is higher than it was before the release. July 13 (Reuters) . the IEA said oil use would grow by 1. just shy of the 9.World oil demand growth will accelerate next year.com/qyh62s ) 2011 DEMAND GROWTH TRIMMED Next year's demand expansion follows on from lowered expectations for this year. The IEA also said Saudi Arabia's crude exports could be eroded by a growing domestic need for oil for power generation. but it still took the view that OPEC oil output would remain well short of expected demand. I think we've done that. Saudi Arabia pumped 9. while investor Jim Rogers on Wednesday called it "meaningless" to the market.com/kaf62s ) ( http://link.S.

"I think it will take a crisis to get them to change direction and gold is likely to do well in a crisis. He attributed some of the current high price to a lack of confidence in the U. "By taking oil from stocks they are satisfying current demand. Inventories are also 11 percent higher than expected. and historically oil has been a good hedge against this. "Oil is an essential driver of modern society and in a number of forms is irreplaceable. crude forward futures curve is in a very steep contango. gold appeals By Claire Milhench LONDON. "We are already seeing a significant supply response to the increase in prices. Schroders Private Banking had some 16." He said that the U. "We felt equities were on attractive valuations and in the 1970s. ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE IEA move could add to storage. being able to tackle the federal budget deficit. added in autumn 2010 when energy was lagging other commodities. "In which case." he said. Spot gold is currently trading at around $1. "Gold shares have been disappointing performers.4 billion pounds ($26. Department of Agriculture said at the end of June that farmers had planted the second largest acreage with corn since World War II. REUTERS/Herwig Prammer . so we think that's an opportunity. "It is quite hard to justify the current price but the long term upward trend is unlikely to change until we see a significant change in policy direction that leads to greater confidence in fiat currencies." Farago said. which could encourage people to buy oil and store it." he said. That is why we haven't seen much of a shift in price at the long end of the curve. said Robert Farago. but you've had quite a dramatic move at the short end. GLITTERSON IN NEAR ASIA'S TOBOOMING OIL FROM SILVERSILVEROF RESERVESRELEASEMARKNOW ASIA GOLD PRODUCERS INVESTOR. On a three-year time horizon he saw little spare capacity in the oil market as demand growth in emerging markets will eat away at it. (Continued on page 13) EU Commissioner for Energy Guenther Oettinger (L) and Iran's Minister of Petroleum and President of the OPEC Conference Mohammad Aliabadi attend a news conference after the EU-OPEC Energy Dialog in Vienna June 27. The U. ITALYAMID ASIA OIL ANDENERGY NEEDS INENERGY DEMAND IEA RELEASE FURTHEROPPOSEINDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON WITHSECOND OIL YET RELEASE MAY ECONOMIC RELEASE OIL OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL PASSES ENERGY GAS CHINA SHINES THE RACE HIGHS WOES SPECIALTO DECIDE DEBATE TO FEED FOR IEA DOLLAR COAL GRAPPLESCHINA’S AGENCYWOES DEMAND —————————.GERMANY. but creating more demand in future. due to bottlenecks in supply. but he is also holding some gold mining shares within the equity allocation. "Looking beyond that.S. STRATEGIC ROLE Farago believes that oil and gold have a strategic role in investors' portfolios but agricultural commodities do not.S. "The relative valuations look attractive. 2011.The IEA's decision to release some 60 million barrels of oil from its strategic reserves could lead to more people buying oil to store it. which puts downward pressure on their margins. July 12 (Reuters) . Gold is seen as a strategic investment because it acts as a store of value and alternative currency." About 7 percent of his balanced portfolio is in gold bullion ETFs. energy equities outperformed.S.546 an ounce as investors worry about the spreading eurozone debt crisis. and so there are less compelling reasons to hold them. "Their action doesn't seem to make sense to us or the market. Now the oil price has come off but they haven't recovered. releasing more from stocks will just feed those people with storage capacity. His cross-asset portfolios are currently exposed to the oil complex through energy equities. We haven't had a proper currency crisis yet. with the Democrats and Republicans still slugging it out. The news pushed corn to three and a half month lows." he said.29 billion) under management at end-March 2011. head of asset allocation at Schroders Private Banking. the market will be tight and that should be good for energy equities." he said." he said. They have suffered as the oil price has gone up." he said.ENERGY HALFWAYONRELEASE RELEASE GOLD." Farago told Reuters as tenders for the International Energy Agency's release got underway." He argued that the drivers for agricultural commodities are cyclical. Schroders was also worried about inflation. when there were broader inflation worries.

Europe's biggest oil consumer. More than half of IEA oil release achieved July 8 (Reuters) . Officials in the Netherlands also expect it to sell all of its allotted volume. announced the release in a bid to push down crude prices and underpin the global economy. "There's what they say will be released and what they actually release. In what could also indicate limited immediate demand. VOLUMES RELEASED OR COMMITTED SO FAR Total: 34. Other European countries have released only part. We expect of the total only about 50-60 percent to come out. more than the 30 million barrels the IEA expected.GERMANY. an analyst at JBC. which is expected to provide 17. the government sold off 63 percent of a total of 4. The reduction follows "restrained" demand for a sale by Germany. More than half of the release is coming from the United States. and said the crude oil proportion would be slightly less than earlier thought.24 million previously. mostly due to sluggish industry and consumer demand. according to traders and government and industry officials.000 barrels from an earlier estimate. July 11 (Reuters) . About 58 percent of the planned amount has been released or committed for release so far. The IEA trimmed the amount coming from Europe. Oil prices. Oil available under the plan will amount to 59. REUTERS/Lee Jae-Won (Continued on page 14) . and not much of that will be from Europe.S. down from 19.2 million barrels allocated as a part of the IEA release. according to Reuters calculations.000 barrels GERMANY Germany has sold via tenders 63 percent of the 4.6 million barrels of crude from the Strategic Petroleum Reserve (SPR). It is unlikely to try to sell the rest. which amounts to about 2. Oil prices fell to around $115 on Monday on concerns of slowing demand . supplies. which sold 30. such as the UK. IEA officials said last week they hoped a sizeable part of the oil would be taken up and that the move was adding to supplies of high-quality crude.81 million barrels. in a statement on its website.83 million barrels U. when the IEA announced the move to make 60 million barrels available.646 million barrels disposed of in the tenders. The stocks release is only the third in the IEA's history. Its last such move was in 2005 in the wake of Hurricane Katrina's disruption to U. Below are the volumes that have been confirmed or committed for release so far as well as a breakdown on how the releases are being managed in different countries. said the IEA.83 million barrels. of stored oil and slightly higher than expected crude sales by the United States in its largest-ever auction of emergency supplies. ITALYAMID ASIA OIL ANDENERGY NEEDS INENERGY DEMAND IEA RELEASE FURTHEROPPOSEINDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON WITHSECOND OIL YET RELEASE MAY ECONOMIC RELEASE OIL OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL PASSES ENERGY GAS CHINA SHINES THE RACE HIGHS WOES SPECIALTO DECIDE DEBATE TO FEED FOR IEA DOLLAR COAL GRAPPLESCHINA’S AGENCYWOES DEMAND —————————. GLITTERSON IN NEAR ASIA'S TOBOOMING OIL FROM SILVERSILVEROF RESERVESRELEASEMARKNOW ASIA GOLD PRODUCERS INVESTOR. which had been reduced by the Libyan conflict.The International Energy Agency on June 23 announced the release of 60 million barrels of oil and oil products from strategic government stockpiles. down 784.The International Energy Agency (IEA) on Monday said the amount of oil made available from emergency reserves. an adviser to 28 industrialised countries. industry sources told Reuters last week.S. A gasoline pump is seen hanging at a petrol station in central Seoul. to make up for disrupted Libyan supply. the adviser of 28 industrialised nations on energy policy. the United States has been the largest contributor to the release.2 million barrels that were offered to the local market in tenders.: 30.ENERGY HALFWAYONRELEASE RELEASE GOLD. ANOTHERSHORTAGES BALIRESERVES WEAK MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE IEA trims total oil volume planned in release By Alex Lawler LONDON. The agency says its plan is working. In Germany. would be slightly less than earlier stated after sales by member-countries met with mixed demand. at around $115 a barrel on Monday. have opted to lower minimum stock requirements instead of offering the crude and products to the market via a tender.05 million barrels Belgium: 94.6 million barrels Germany: 2. France has extended the period in which stocks could be released by three months through to December. are higher than they were on June 23.600 barrels South Korea: 441. The IEA. Some European countries. selling the full volume of its allocation." said David Wech. Traders say the lack of a sale tender by every IEA member has reduced the impact of the release on prices. Analysts at JBC Energy said the tweaked IEA numbers did not alter their view that not all of the total amount would be released onto the market.646 million barrels The Netherlands: 1. So far.

(Continued on page 15) .000 tonnes of jet fuel at market prices for July delivery. Unlike Germany. BELGIUM Belgium's allocation is 797.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE The country has not yet made a decision about whether to sell the remaining volumes of crude and oil products. an energy ministry source said. naming independent refiner Valero the top buyer. the UK is obliged to hold stocks equivalent to 67. UK sales will be at the discretion of oil firms.05 million barrels of Brent and Forties crude. ITALY Italy's Unione Petrolifera said it would reduce minimum reserve requirements and sent companies a breakdown in tonnes of crude and product stocks. FRANCE France is among IEA member countries that have reduced minimum mandatory stock levels imposed on the private sector so that oil companies can release oil from their inventories. The oil stock-holding body Apetra said on Friday it had sold its part of national volumes allocated by the IEA but that the remainder would be managed by oil firms with no obligation to sell. but current stocks for most oil products are much higher at around 80 days. SOUTH KOREA South Korea initially planned to release 2 million barrels of crude and 1. If there is no demand. Final results are due by July 11 but are unlikely to differ much from those released on Friday. which hold oil stocks on behalf of the Dutch COVA stockpiling agency. a document seen by Reuters showed. Overall 15 companies committed to pay $3. UNITED KINGDOM UK stocks allocated for release represent 3 million barrels.948 million barrels of crude and 1. SPAIN Spain is not due to hold tenders for releasing stocks as part of the IEA programme. The volume is about 94. On Monday. or 150. state stockpiling agency EBV said on Wednesday. The country is likely to sell 1. without naming the buyer. according to the DECC.519 million barrels of products. That is partly because of the slow progress of the release. during which they could release up to 3. the IEA said in a conference call the oil would be available probably this week. where a national organisation has issued tenders. preliminary results showed. its full allocation volume. It does not plan to issue a tender to sell oil from their strategic petroleum reserves.000 tonnes or so are mostly distillates including diesel and will be offered at the discretion of oil firms holding the reserve stocks. The government has not specified any volume that has been released under the programme or said whether any oil has been released at all. THE NETHERLANDS The Netherlands may be the only European country set to release the full allocated volume under the IEA programme. More than half of Germany's sale of 2. a spokesman for the Department of Energy and Climate Change (DECC) said. France has extended the period in which it releases oil from inventories by three months until December. A decree published about the release on June 29 required official stockpiler CORES to monitor reserves but did not provide for any tenders to sell the 2.173 million barrels shown in the table provided by the IEA. but the totals have been updated to 1. diesel and fuel oil. including gasoline. after a last-minute revision to conditions late on Thursday.274 million barrels of refined products Spain no longer needs to set aside under IEA requirements. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————.46 million barrels of products from strategic stocks. UNITED STATES The United States sold more than 30 million barrels of crude from the Strategic Petroleum Reserve (SPR). France had initially given private companies three months until September. according to Reuters calculations.1 million barrels of crude oil under the release programme will be heavy crude. diesel and fuel oil. adding that the final impact on the market would be minimal. The remaining 94. which the government body issued. "These volumes will be put at the market's disposal but they do not have to sell. Apetra general manager Alain De Mot said. As a crude oil producer. Some traders attributed the success of the Dutch tenders to its mix of oil and products. Italy's allocation is 2. Brent and diesel were sold via a tender. about $3 below European benchmark Brent oil prices on Friday.19 per barrel.GERMANY. The volume include gasoline. which the market needed.000 barrels of refined oil product. in its largest-ever auction of emergency supplies. But companies with reserves in Italy said there were still doubts about how quotas would be distributed. and to its geographical advantage as Europe's oil trading hub. how can they sell it?.6 million barrels.524 million barrels of oil products. COVA has reissued a tender to sell the remainder. condensate and diesel have been sold. a DOE source said. Many traders expect the diesel to be sold.2 million barrels. indicating the oil may never leave storage tanks.600 barrels. TURKEY Turkey's contribution of about 1 million barrels will be sold by Turkish refiner Tupras . A DECC spokesman said on Thursday Britain had no intention to extend the release period. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. The average successful bid was $107." De Mot told Reuters last week. Forties and condensate have been sold from tanks of companies. About 1. But no update has been given.3 billion for 30.5 days of consumption. which is above the 1.000 barrels of diesel.RESERVESRELEASEMARKNOW OIL FROM GOLD. Companies holding emergency oil stocks have no obligation to tender or release them. Apetra said it had already sold 12.2 million barrels of crude oil and refined oil products.

(Continued on page 16) Total United States 30.407 8. Polish refiners PKN Orlen and Lotos have to keep fuel stocks equal to 76 days of Polish demand as their strategic reserves. The percentage is equivalent to about 441.242 2.426 Of which: Gasoline 300 300 diesel 1.469 5.848 3.000 17. They will lower their storage reserves through regular sales.071 2. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR.811 7.524 1. TABLE-Oil to be made available under IEA release plan LONDON.242 2.038 38.274 1. or how much has actually been sold.640 3.640 3. before the end of the 30-day release period that started on June 27. The volume matches the allocation as a part of the IEA release programme.145 702 3.998 5.274 1.958* 1. even though the government would prefer an all-products release because it would have an immediate impact on markets.000 barrels of crude oil and oil products.149 797 3.640 Japan South Korea Total IEA Pacific Belgium France Germany Italy Netherlands Poland Spain Turkey United Kingdom Total IEA Europe Total IEA 59. Source: International Energy Agency. JAPAN Japan cut the reserve requirement for oil companies.9 million barrels of crude and products from commercial inventories. POLAND Poland's allocation as part of the IEA release programme is 960.553 40.169 Residual fuel Jet/kero oil - 95 2. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. July 11 (Reuters) .023 310 600* 3.684 43 476 500 1.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE The total volume of 3.957* 1.000 13. mostly gasoline and diesel with small volumes of crude oil.071 3. the economy ministry said.770 1.148 654 2.173 959 2.258 19.467 million barrels matches the allocation as a part of the IEA release programme. have been lowered in these countries.150 2.915 30.173 4. according to Reuters calculation.The International Energy Agency on June 23 announced that it would release 60 million barrels of oil into the market. Trade ministry officials have said that it is up to oil refiners and importers to decide which commercial reserves to draw down. Below is an updated breakdown of how much individual countries are releasing and the proportion of crude and oil products. Poland will release about 130.915 7. according to the economy ministry. and 29 percent of the oil products that will be made available had been released as of July 6.770 2.467 11. The release started on June 30.000 barrels.524 150 650 2.956 Refined Product 3.915 3.RESERVESRELEASEMARKNOW OIL FROM GOLD.773 21.382 Public 30. which include both crude and refined products. the Economy Ministry said.688 1.169 1.576 6 64 968 144 1.242 1.GERMANY. * The breakdown in crude and product has been estimated. making available 7. It will not be possible to determine what proportion of the total will be crude or products.183 139 331 176 2. crude or products.467 Crude Industry Oiil 7.799 895 7.833 797 3.524 959 2. It will be up to them how to sell it.181 95 327 422 422 .467 3.400* 14.375 650 373 150 510 1. overall stockholding obligations on industry.000 tonnes of fuel reserves.620 1.071 3.274 1.181 1.

which match the quality of crude oil that the IEA intended to release from member countries' stocks.2 million barrels. A tender for the remainder -150.000 barrels of conden.S. cool prices.GERMANY. and Claude Mandil (R). on The UK government and UK-based oil companies have not top of 600." said Ted Van Dam Merrett. sweet crude from North Sea.000 barrels pending final sale. former Executive Director of International Energy Agency. the IEA announced plans for its member counits strategic oil reserves was also oversubscribed. and Dutch officials said they were likely to sell the full volume.000 barrels of crude. government's tender to sell light sweet crude from On June 23. more than half of which was heavy crude. resulted in the sale of 450. officials said on Thursday. (Continued on page 17) Former French bank Societe Generale's Chief Executive Daniel Bouton (L)." the trader said. Van Dam also said that last week's tender.cal advantage as Europe's oil trading hub.m. (0900 GMT). sate and 150. Germany has sold about 63 percent of its allocated volume. managing director of the Dutch COVA stockpiling agency. July 7 (Reuters) . France has extended the period in which oil companies can The Dutch government offered 600. located volumes. 150. 2011.The Netherlands became the first European country to offer its entire volume of oil and oil products as part of the IEA emergency release plan.000 barrels of condenfree their stocks due partly to the slow progress of the release. period. The U. Forties and Brent are light. But it has not deOther European countries have released only part of their alcided whether to sell the remainder.RESERVESRELEASEMARKNOW OIL FROM GOLD. The initial allocation from the IEA showed the Dutch release would be crude oil only. sate and Forties crude directly to refineries on Thursday. tries to release 60 million barrels of oil and oil products from strategic reserves to cover the lost oil supply from Libya and to Stock releases in other European countries have been slow. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. One physical oil trader said the Netherlands had a geographiThe government has already sold 300. he added.000 barrels of Forties from Thursday's offer. but the tender included diesel. attend the annual shareholder meeting of French oil company Total in Paris May 13. The govlast week.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE Dutch seen selling full IEA oil release volume By Ivana Sekularac AMSTERDAM. which closed on Thursday at 11 a.will be reissued because of technical difficulties.000 barrels of Brent crude and diesel it tendered provided any data regarding the released volume. Chairman of Lloyd's. ernment said Britain has no intention of extending the release "This totals 1. Lord Levene of Portsoken (C). Europe has a structural supply shortage of diesel. They are not main Dam said. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. REUTERS/Jacky Naegelen . Van "Look at the countries releasing the stock. He declined to provide details on the remaining trading hubs.000 barrels of diesel -.

after the sharp fall in the initial reaction to it. despite IEA -Guild By Ikuko Kurahone LONDON. has about $150 million of assess under managements for selected clients. But international U. as many countries. Federal Reserve's second round of quantitative easing. The UAE is the world's third largest oil exporter.S. after exiting these assets in March to focus on energy and commodities. "It has changed nothing. or QE2.S. the IEA. He was referring to escalating violence in countries such as Syria and Yemen. Last month.RESERVESRELEASEMARKNOW OIL FROM GOLD. crude futures were trading $96.GERMANY. stocks. SPDR Gold Trust. the chief executive of Guild Investment Management. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. advisor for 28 industrialised nations on energy policy." Guild Investment Management. Gold and agricultural commodities will continue to rise. (Continued on page 18) A petrol tanker leaves an EPPCO gas station in Dubai June 23. ETFS Gold Trust and others. Guild also said Saudi Arabia has surplus capacity to boost output volume when supply is tight but the quality of Saudi oil might limit its reach in the market. Physical crude oil prices are $12-$15 per barrel higher than U. "Their oil is sour and very heavy that is very expensive to refine. "To many observers it appears that all QE2 did was run up asset prices of gold. North African producer Libya's oil supply has been disrupted since February because of its continuing civil war. California. The programme ended in June. foreign currencies. and its petrol consumption is estimated to be around five million litres per day. "Prices are not attractive because cost of transporting and refining the oil they are producing are so high. and Asian emerging markets such as India and Malaysia. so they are not offering any bargain. gold and some precious metals mostly through exchange traded funds (ETFs). fund manager said. oil. Monty Guild.93 a barrel by 1546 GMT on Wednesday.S. His oil price forecast refers to the average price to buy physical crude oil in the United States." Guild told Reuters in a telephone interview. and some other commodities.. Its portfolio includes equities. will increase their holding in gold in their national portfolio. He also has a view that U. did little to boost actual economy. Food prices will be supported due to expected growth in demand from India and China.S." Guild said. a U. Its current holdings include Brigham Exploration Co. Teucrium Corn Fund . U. said the IEA's move did not change oil's fundamentals. such as China and Russia. Guild said.5 million barrels per day. Therefore the prices they are offering are not good prices." he said. July 6 (Reuters) . the world's top oil exporter.S. These countries are very small producers but the market has been concerned about the spillover of the unrest to Saudi Arabia.The price of physical crude oil will hit $150 a barrel this year in the United States due to unrest in North Africa and the Middle East. To match feature EMIRATES-FUEL/SHORTAGE REUTERS/Jumana El Heloueh . such as fertiliser. announced that member countries would release 60 million barrels of crude oil and refined oil products to cover the lost oil supply from Libya and to pull down high prices. "Our opinion continues to be oil prices will reach $150 barrels this year due to the fighting near Saudi Arabia. despite the emergency oil stock release coordinated by the International Energy Agency (IEA). based in Los Angeles. crude oil futures depending on grades of oil and the geographical locations.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE Oil will hit $150 in U. The fund currently has an approximate 25 percent allocation to the global oil and energy sector. he said.S. Deethree Exploration LTD . crude oil and ICE Brent crude futures have risen to the levels above where they were before the IEA announcement." he said. now pumping 2. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. 2011. It has expanded its equity portfolio again to agriculture and related stocks. It is purely political. he said.

" PICTURE 'IMPROVES' FOR LIGHT CRUDE Oil prices at first fell sharply as a result of the IEA's action but were trading around $112 a barrel on Monday. "The release could potentially lower our near-term Brent crude oil price target from $117/bbl to $109-111/bbl and our 2012 Brent crude oil price forecast from $130/bbl to $125-127/ bbl. this time around are looking good.S. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. which clearly shows that (for) light. from an earlier estimate of $5-$7/bbl. imports.The International Energy Agency said on Monday it hoped a very sizeable portion of its oil stock release will be taken up by the market and the move was already adding to supplies of light. supplies.we have seen a clear improvement. July 4 (Reuters) .Goldman Sachs said on Friday that 2011 Brent crude oil prices were likely to fall by $6-$8 per barrel. "We've had a fairly successful apparent level of uptake for the SPR release in the U. which is the improvement in refining margins that we've seen and a less tight differential between light and heavy crude. "We would hope a very sizeable proportion of this will be taken up. It had become clear that the impact of the International Energy Agency's 60-million-barrel oil release would be much smaller than the initial announcement suggested. Other countries are preparing to offer their share of the 60 million barrels. meaning more crude could head to Asia. on June 23 said it would release 60 million barrels of oil from strategic inventories to fill the gap in supplies left by the disruption to Libya's output. from an earlier estimate of $10-12/bbl. which is driving the increase in global oil demand. adviser to 28 industrialised countries. German state stockpiling agency EBV said on Monday. the Department of Energy said on Friday. head of the IEA's Oil Industry and Markets Division. the investment bank said.S. Japan's Tanaka said on Monday his challenges would include working closely with non-IEA-member countries such as China and India about the use of emergency crude oil stocks.S. IEA officials on the conference call said the stocks release had had boosted supplies of high-quality crude that have been reduced by the conflict in Libya." said Didier Houssin. "The experience previously from Hurricane Katrina was good." The United States sold more than 30 million barrels of crude from the Strategic Petroleum Reserve (SPR). SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. But demand has proved lacklustre for sales in some IEA countries.S.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE IEA sees sizeable take-up of oil release By Claire Milhench and Alex Lawler LONDON. sweet crude in the United States could reduce the need for U.RESERVESRELEASEMARKNOW OIL FROM GOLD. The IEA said on the call Turkey's contribution of about 1 million barrels would be sold by Turkish refiner Tupras and the oil will be available probably later in the week. The initial signs from the U." Fyfe said. (Continued on page 19) The incoming International Energy Agency Executive Director Nobuo Tanaka listens to a question during a news conference at the Foreign Correspondents' Club of Japan in Tokyo January 5." said David Fyfe. sweet crude . Other countries such as the UK are making supplies available by reducing the obligation to hold stocks rather than direct sales of stored oil. "There are some significant factors beyond the absolute value of the barrel. all of the oil on offer. Its last such move was in 2005 in the wake of Hurricane Katrina's disruption to U. on a conference call for journalists. Germany has sold 63 percent of the total 4.for which the Libyan disruption was a key problem -. Asked to judge the success or failure of the move. The stocks release is only the third in the IEA's history. sweet crude. such as Germany. Goldman forecast the prices of 2012 Brent to fall by $3-$5/ bbl. REUTERS/Toru Hanai . close to where they were before the IEA announced the move.2 million barrels of crude and oil products it put up for sale. Director of Energy Markets and Security at the IEA. The IEA. An EBV spokesman described the level of interest in the sale as "restrained.GERMANY. Goldman: 2011 Brent to fall $6-$8/bbl on IEA clarity July 1 (Reuters) .." Goldman said. 2007. Fyfe added that the release of light.

The member countries of the Paris-based IEA. OPEC's Secretary General Abdullah al-Badri said the IEA order to release emergency oil stocks should be halted immediately. Ecuador's oil minister Wilson Pastor said on Thursday. of which Ecuador is the smallest producing member. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR." he told reporters. South Korea. (Continued on page 20) An employee fills the tank of a car at a petrol station in Seoul June 27. which plunged on news of the IEA move. formed in 1974 to protects consumers' interests following the Arab oil embargo. will release 3.The oil market will not be affected in the long term by the International Energy Agency's release of strategic oil reserves. Last week. "It's not going to affect the market long term. The IEA could decide by mid-July whether to release more oil from strategic oil reserves. REUTERS/Jo Yong-Hak . June 30 (Reuters) . ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. "The last meeting showed a weakness in OPEC.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE IEA move won't hit crude market long-termEcuador By Santiago Silva QUITO." Pastor added that the price of Ecuador crude "should move" in a range of between $80 and $100 a barrel." he said.46 million barrels oil stocks over 30 days after a meeting with local refiners later on Monday. On Monday. as a member of the 28-nation IEA.RESERVESRELEASEMARKNOW OIL FROM GOLD. an official said earlier this week. Investors continued to keep an eye on the progress of reserve oil stocks sales by the IEA member nations to see how well the market can soak up the supply.GERMANY. are on track for a 6 percent gain this week. 2011. "Industrialized nations took advantage of this situation to release strategic reserves." He said industrialized nations sought to benefit from the failure to reach an agreement at the June 8 meeting of the Organization of the Petroleum Exporting Countries. but does not see the program extending for longer than a month or two. the 28-member IEA shocked the oil markets when it announced a plan to release 60 million barrels from emergency stockpiles over an initial 30 days to fill a gap in supplies. Brent oil prices. "These strategic reserves can be compared to a pail of water in an Olympic pool. after two straight weekly losses. hold emergency stockpiles to be used in the event of an actual or potentially severe oil supply disruption.

In the same week Obama contacted the Middle Eastern leaders."said Lawrence Eagles. they don't sell it. and has raised expectations of increased supply that may not be realised. timing and qualities included were clear almost As a detailed timeline emerges of the International Energy immediately after the first announcement.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE Oil stock release looks chaotic. A U. Analysts say many of the IEA stocks are unlikely to be sold unless they are priced well below the market. "In a couple of days the IEA plans for release of 60 million barrels of oil have moved from looking well planned and thought through. price with traders saying the "IEA effect" has been almost comswings pletely absorbed and discounted by the market. Far from depressing prices and rescuing a fragile economic recovery in the industrialised world. (Continued on page 21) .S. oil traders say. The release by the International Energy Agency (IEA) is badly coordinated. is likely to largest interventions ever by Western governments. locations. many of the oil stocks released will be oil products. prices are almost back to where they were and analysts say the policy is chaotic and could backfire. prices have snapped back above $113 and are still rising Traders abuzz at timing of US-led oil talks." said Carsten Fritsch. Uncertainty over the release of oil products into the market could depress refining margins and cut supplies to customers in some regions. some of which are already abundant.Just a week after the West's energy watchdog announced the release of millions of barrels of oil. according to a dozen tradcrude from the Strategic Petroleum Reserve and details of the ers spoken to by Reuters. except perhaps in the United States. officials had been kept out of the press. indicating the oil may never leave storage tanks. could backfire By Christopher Johnson LONDON. market. "Out of the remaining 30. IEA or Arab officials knowingly leaked the plans. World oil prices surged by 31 percent in the first four months of this year. now have many traders wondering whether word of already started a tender process to sell 30 million barrels of the talks leaked out to key players. In Europe. oil markets had their most volatile session in years.S. news. we see less than 8 million barrels being pushed into the market.RESERVESRELEASEMARKNOW OIL FROM GOLD. the Department of Energy (DOE) has month.reuters. Graphic package on reserves: ( http://r. British firms holding emergency oil stocks have no obligation to tender or release them. and the lack of guidance on refilling. Agency's two-month march toward the June 23 announceTraders say the disbursement of these crudes. Wiper at PVM says the full amount of 60 million barrels is "certain not to appear in the market". especially if the DOE sells the oil aggressively. President Barack Obama was seriously considering tapping strategic reserves. U. a spokesman for the Department of Energy and Climate Change (DECC) said on Thursday. Eagles said. There is no evidence that U. Four days later. others are not. administration official told Reuters last week that the Saudis were grateful that a visit to the kingdom by senior U.GERMANY.. as the civil war in Libya cut its exports from the market.S. dampening crude are parsing the days of huge price moves leading up to the prices. If they don't sell it. the president called King Abdullah of Saudi Arabia and Kuwaiti Emir Sheikh Sabah alAhmad to talk about the situation. forcing North Sea Brent crude futures down almost $7 per barrel on the first day and down to a low of just above $102 by Monday. a move many traders and analysts have struggled to explain. crashing by almost 10 percent in a matter of hours on May 5. IEA officials were not immediately available for comment. That timing. global head of oil research at JP Morgan and a former IEA official. according to an administration official. forcing a drop in the oil market. traders have the desired effect on the market. European product supplies. work against the barrels being used. and a subsequent price plunge this In the United States. one of the and low sulphur grades well liked by the market. By the first week of May. June 30 (Reuters) . the release of strategic oil stocks is piling more misery on refiners. I wouldn't be surprised if the 30 million barrels won't be retrieved completely." he said. It's not surprising either that OPEC Secretary General al-Badri seems much more relaxed. "I see no need for sales in the United States as supplies are not tight there at all. On May 6. "It's perhaps not so surprising that we've turned a full price circle. "Refining margin volatility caused by the lack of clarity on the IEA release volumes risks reducing." Oil prices tumbled immediately after the announcement of the stocks release on June 23 as funds sold. secretary general of the Organization of the Petroleum Exporting Countries. June 30 (Reuters) . and many do not expect to. commodity analyst at Commerzbank in Frankfurt. This would be reassuring for Abdullah al-Badri.com/xew32s ) "NO OBLIGATION" Arrangements in many of the other 27 IEA member states are quite different. to ill-conceived and poorly organised. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. and may not be completed. By David Sheppard and Joshua Schneyer Strategists and analysts say one key problem with the IEA NEW YORK. "They have an obligation now (to hold stocks) and we are releasing them as part of that obligation." said DECC spokesman Cameron Ramos.S. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————." said Philip Wiper. director of brokers PVM Oil Associates. who on Monday demanded an immediate halt to the IEA action designed to force down crude prices. endangering the global economic recovery.6 million barrels. rather than supplementing. mainly light ment it was releasing strategic petroleum reserves. pushing the European benchmark Brent price above $125 a barrel.One of the largest oil price release is that it is being disbursed in various different ways routs in history came in early May as the United States led and by many different organisations." Traders and endusers are not obliged to buy the oil being released from stocks. "The method of sale. an Obama administration official said. Some of these are very discussions with top Middle East producers to intervene in the well organised.

sour crude provided by Saudi Arabia. Talks had been under way since late April among the 28 failing to convince OPEC to act. requesting Didier Houssin. Also that day. lease reserves immediately after Libya's exports were cut in late February.S. released a May 27 note to On the day of the official news. and Saudi officials had secretly discussed a plan for the U. the West's oil watchdog. where refineries were suffering most from cuts in Libyan supply. it would be another seven weeks before the IEA. The to comment on whether planning information leaked. On June 17. a consultancy run by former White House from above $125 a barrel. slashed their bets on higher oil prices that they had built up as Like major inter-government interventions into currency or the crisis in Libya developed.S. . Graphic-timeline of IEA plan: ( http://r. But most traders could not pinpoint specific reasons for such a steep fall without any major news driving it. oil did not act to cool prices at its June 8 meeting in Vienna. In the week leading up to the announcement. two people familiar with the plans told Reuters.Oil prices started falling in the hours immediately before the ber nations were prepared to use "all tools" at their disposal IEA made its plans public in an announcement from its headto help protect the global economy. secret. Medley declined comment.S.nevertheless meant it would have been easy for word to slip which had announced a unilateral production increase after out. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————.S. in IEA also discussed its plans with other major economies inWashington.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE Another gut-wrenching drop came in mid-June. they have since rebounded back to the level they held one day before the official news and closed on Thursday around $112 a barrel. officials at positions by as much as 40 percent over that week. Brent oil prices fell and continclients predicting Washington would tap its reserves if OPEC ued the downward trend through Monday. a move of this scope is fraught with risk. The U. based largely on "reading the tea leaves" and public state(Continued on page 22) ments from the agency. Brent oil prices also fell sharply in the hours just prior to the IEA announcement. would ship some of the SPR crude to Europe. But since then." said one trader at a major European trading house. Commodity Futures Katrina and Rita. Early signs high oil prices were hitting the global economy were one factor. which is not a member. declined the agency prepare a plan to tap reserves for approval. "Looking back. The agency. WHO WAS IN THE LOOP? On June 15. distributed a report saying reserve holders were "seriously considering a release". The plan was then sent Trading Commission (CFTC).reuters. traders said. sweet oil from its Strategic Petroleum Reserve and then replenish the SPR with lower-quality. After a meeting of the IEA's governing board on May 19. who were given 48 hours to respond. said matter. Traders again struggled to explain the move. Wiper said the public announcement still came as a surprise to "most at least". energy advisor Robert McNally. South Korea and Japan. canvassing IEA members to see how much each could contribute to a release. the been consulted in various discussions . On the same day. in part because Riyadh was unwilling to discount the supplies of its sour crude. a hedge fund consultant. Meanwhile. U. to all 28 IEA member states.RESERVESRELEASEMARKNOW OIL FROM GOLD.com/fet42s ) Graphic-US strategic reserves ( http://r. the day oil prices fell $10 was the first day that Obama started to consult seriously on a plan to use the SPR in this way. the Brent crude oil dropped to around $114 a barrel The Rapidan Group. said people familiar with the member nations of the agency and within its secretariat. director of energy markets at the IEA. has rebounded sharply. while others linked it to recommendations by Goldman Sachs that prices could fall. Thursday. quarters in Paris last Thursday (June 23) at 09:00 EDT (1400 GMT). sources said.S. Philip Wiper of oil PVM in London wrote in notes to clients this week of the possibility the information had leaked to some market participants. the Obama administration sprang into action.GERMANY." wrote Wiper. primed to respond to emergencies like Hurricane White House referred queries to the U. telling reporters on Capitol Hill that The Wall Street Journal reported on Friday that the CFTC is tapping reserves was not seen as an effective way to control investigating what the paper called "suspicious" trading pump prices. After members of the Organization of the Petroleum Exporting Countries (OPEC) could not agree on a production increase at their meeting in early June. in a move reminiscent of the May 5 crash. the Departments of Energy and Treasury to discuss policy From early May. and Saudi Arabia.reuters. well before the reserve releases were made public on June 23. Traders say that the sheer number of officials who would have according to people familiar with the matter. Reuters reported that in May and early June. "There are rumors that May 5th.at IEA headquarters. until the day of the announcement last scenarios with experts outside of government first. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. I think it was not such a well kept ahead of the announcement. Medley Global Advisors. as did IEA members Britain. Oil based ICE Exchange showed hedge funds cut back their long industry sources said it is not uncommon for U.S. Interior Secretary Ken Salazar downplayed the possibility. oil prices plunged in high volume trading. the agency urged OPEC to increase production and hinted mem. according to sources who saw the report. The CFTC declined to comment. Data from the CFTC and the UKdebt markets. one person familiar with the situation. responded June 21. While they continued to slide throughout Thursday. to release light. gaining $10 to trade at $112 a barrel In an interview with Reuters. would publicly unveil plans to release 60 million barrels of strategic reserves. hedge funds who asked not to be identified. On June 20 the United States contacted the IEA. even though it had chosen not to re- . McNally said his prediction was on Thursday June 30. in other IEA member states and the Middle East cluding China.com/cah48r ) WELL KEPT SECRET? After the early-May plunge. Obama authorized a request for an IEA feasibility study. The swap plan was ultimately abandoned. U. two reports caught traders' attention. On the same day.

The added oil will boost world supply by nearly 2." Jones said at an event in Mexico City on clean energy technologies. REUTERS/Heinz-Peter Bader ." he said. "We didn't do it for price. an official said on Wednesday. said the release would likely be temporary since demand is seen falling at the end of the year. in a sign of deepening concern among Western leaders that high energy costs could further damage the global economy. June 29 (Reuters) . which has long feared consumer nations will use their stockpiles to undercut the cartel's sway over prices." All 60 million barrels should be in the market by the end of 30 days. June 9. 2011. unless member countries have difficulty finding buyers. "It will be up to our member countries.5 percent. OPEC. It was only the third such move in the agency's history. initially said the release was unnecessary and the market was balanced. (Continued on page 23) OPEC Secretary-General Abdullah El-Badri (R) talks to journalists before a panel discussion at the World Economic Forum in Vienna. Oil prices tumbled after the announcement but have since recovered. a price that can force consumers to reduce driving or cut spending in other areas of their household budgets. depending on what the market situation is. Richard Jones. "We did it to make sure the market was supplied in the coming months and if the price stays steady that's good from our perspective because we saw that there was a real potential for a sharp price spike. There could be other disruptions. "We do believe it could be temporary but we have to see how the market evolves. I don't see that we'll need to continue it for very long because we see demand declining in the fourth quarter." Oil prices have risen 20 percent over the past year. The World Economic Forum on Europe and Central Asia takes place from June 8 to 9. A decision on whether to repeat the release after the 30-day time period is over could be made around the third week of July. and retail gasoline prices in the United States have hit $4 a gallon. "It may be possible. that even if they offer it for sale they won't get any bids. or just less than Iraq produces. They could decide to continue it for a month or two. 2011 in Vienna. ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF MAY SECOND OIL FOR YET RELEASE PASSES AGENCY TO OIL TO DECIDE ON OIL INTERNATIONAL RESERVESRELEASERELEASE TO RELEASE ENERGY OIL RESERVE RELEASE JULY 2011 JUNE 2011 JUNE 2011 IEA may decide on new oil release by mid-July MEXICO CITY.The International Energy Agency could decide by mid-July whether to release more oil from the strategic oil reserves but does not see the program extending for longer than a month or two. Jones said. The 28-member IEA shocked the oil markets last week when it announced a plan to release 60 million barrels from emergency stockpiles over an initial 30 days to fill the gap in supplies left by the disruption to Libya's output.GERMANY." Jones said. Jones said restocking was not urgent and could wait until the conflict in Libya subsides. since the release only amounted to a small portion of member nations' existing inventories. deputy executive director of the IEA. he said.

S.a decision likely to be welcomed by refiners.S. traders said.European demand is too limp to absorb the 15 million barrels of fuels that the West's energy watchdog aims to release over the next month and whatever supplies are sold will deepen the refining industry's crisis. will be distillates like diesel even though commercial stocks in the storage hub of Amsterdam-Rotterdam-Antwerp are already near record highs. June 28 (Reuters) .RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE IEA stock release wounds Europe's refiners By Zaida Espana and Emma Farge LONDON. refiners have much more political clout than their European counterparts. Scores of refineries in Europe are at risk of closure or up for sale as oil majors like Royal Dutch Shell and Total look to strip out the least profitable assets from their portfolios.largely because of the hefty premium of European benchmark Brent crude to U. seeing as demand is already poor. U.000 bpd of the planned 500. levels -. Wech predicted only around 350. meant to stop high energy prices from stifling economic growth. which may not result in an immediate sale of surplus volumes. Many expect a portion to remain trapped in tanks for lack of demand." said a distillates trader with a trading house. amounts to around 500. (Continued on page 24) . seeing as they'll likely put half the European refining community out of business in the process." said a European oil trader with a bank. obligations backed by the IEA for stockholders to keep enough supplies for a minimum period will simply be lowered. SUPPLY MISMATCH Industry analysts and traders were dubious about the decision to release such a high portion of oil products instead of the light. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. European run rates are already hovering near post-recession lows at 79 percent of capacity and at least 10 percentage points below U.RESERVESRELEASEMARKNOW OIL FROM GOLD. While European markets have been swamped with extra product supplies at a time when a quarter of refining capacity is idle. where all of the emergency oil stocks are crude -. "The IEA data has nuked the market. Analysts and refiners have met the International Energy Agency's (IEA) decision to coordinate the release of 30 days' worth of oil product stocks in Europe with deep scepticism. The release of refined products in Europe is also in sharp contrast with the United States . sweet crude oil the IEA has said is required to replace Libyan exports lost due to conflict in the OPEC producer.000 barrels per day (bpd) of extra supply.GERMANY. The announcement knocked down European gasoline prices by around 7 percent and weighed on distillate prices. traders said. While it will be mandatory under the IEA measures for holders of commercial oil products stocks to offer supplies for sale there is no guarantee that buyers will come forward. refiners are getting more discounted crude. This is equivalent to the output of about three medium-size refineries. easing consumer inflation fears but further eating into refiners' profitability.S.000 bpd would be released this summer . SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. The release." said David Wech at JBC Energy. In the case of Britain. It makes one wonder how they'll replace the stocks. "The 15 million barrels of products should mean that refinery margins get pummelled and runs are cut. The fuels that are released will drive prices down further this summer after a knee-jerk sell-off on Monday. for example. as it will make oil cheaper to process . "The latest development shows once again that U. at a time when over a fifth of capacity is already idle due to waning demand and Asian competition. Over half of the fuels or around 8 million barrels. futures .S.

" said a trader with a European refiner. But traders said owners of storage may be punished by a steep contango since they will be forced to buy back their own oil at a higher price later to replenish stocks. June 8. a Gulf OPEC delegate said on Tuesday. International benchmark Brent crude lost 6 percent of its value after member nations of the Paris-based International Energy Agency (IEA) agreed last week to release oil from emergency stockpiles for the third time in history. and what ultimately will be taken up by the market will depend on the marketing mechanisms chosen to make that oil available: so essentially the prices at which the national agencies sell that oil". will be key in determining the ultimate take-up. Another possible scenario is the stock release boosts exports. but traders said arbitrage economics for diesel for example are not currently profitable. (Continued on page 25) Russia says oil price drop short-term after IEA move By Gleb Bryanski MOSCOW." said the head of the antimonopoly service Igor Artemyev said on Tuesday. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR.and some traders expect the stock release could steepen this structure and make storage more lucrative. Prohibitive export tariffs slowed gasoline exports in May. causing companies to boost exports in order to maintain profit margins. June 28 (Reuters) . But as with the multi-billion dollar storage trade that emerged due to oversupplies after the 2008 recession. the world's largest energy producer. "I do not think this will be a long-term trend.RESERVESRELEASEMARKNOW OIL FROM GOLD. adding oil producers and consumers must try to balance their interests. who oversees Russia's oil and gas sectors. European ICE gasoil futures are currently in a $4 contango -a structure where the front month contract is below those further in the future -. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. the refined oil may simply be transferred from one tank to another. It was trading at near $106 at 1528 GMT. The Finance Ministry says Russia's budget would only be balanced at $115 per barrel of Russia's Head of Iran's OPEC delegation and OPEC president Mohammad Aliabadi talks to journalists at the beginning of an OPEC meeting in Vienna. Prime Minister Vladimir Putin ordered oil firms in February to cap prices. said on Tuesday a fall in oil prices after an emergency move by a consumer agency will be temporary as producers lack extra capacity to boost output at existing fields. The fall in oil prices also prompted Russia's anti-monpoly board to warn petrol retailers to lower prices at the pump or face investigation. which are currently unclear." Deputy Prime Minister Igor Sechin.GERMANY. STORAGE PLAY Traders said that some savvy traders could benefit from the extra supply injection of distillates like diesel by exploiting a deeper contango in the ICE gasoil futures curve. Urals Blend this year and $120 per barrel next year. We warned oil companies today that if they do not mark their prices down we will open up new investigations. Sechin. told reporters in Moscow. June 28 (Reuters) . Rising prices are often cited as the top worry among voters ahead of parliamentary elections later this year and a presidential poll in March next year. Higher oil prices this year have boosted state revenue forecasts by around $51 billion. BNP Paribas' head of commodity markets strategy Harry Tchilinguirian said. there's no demand. The fact is stocks last week. The world oil market is well supplied.Russia. one of Prime Minister Vladimir Putin's closest allies. "You have a notional amount of 60 million barrels that is made available. REUTERS/Heinz-Peter Bader . Energy Ministry data showed on Tuesday. said he saw little opportunity to increase overall global oil production and added a new oil pricing mechanism was needed to make the tapping of new oil fields was profitable.Kuwait has kept oil production steady at around 2." Sechin said. 2011. Kuwait keeps up oil output despite IEA move By Amena Bakr RIYADH.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE Traders said the marketing and pricing mechanisms for the sale. OPEC's president said in a speech at the opening of the group's meeting on Wednesday. "It seems to us that there are no major opportunities to increase the level of production at the current fields. "Oil prices are falling on world markets.6 million barrels per day (bpd) since the International Energy Agency (IEA) said it would release oil "People will just play the contango with the barrels.

46 million barrels oil stocks over 30 days after a meeting with local refiners later on Monday. compared to a Reuters survey which pegged average Kuwaiti output in May at 2. but it might take "a couple of weeks" to reach the market. 2011. "We are mandated that we can act of course when there is disruption. as it had pledged. Tanaka said. with Kuwait and Saudi Arabia arguing they have plenty of spare capacity available to meet any demand. That was echoed by OPEC president Iran. had decided to act ahead of expected tightness.55-2.we can't continue for ever. "Kuwait is now producing 2." Last week's release of oil from strategic stocks in the West." Nobuo Tanaka told reporters." Tanaka said. But Gulf oil exporters say they will likely maintain their production at pre IEA stock release levels because demand for crude in other consuming countries is so strong. reducing demand. he said. PRE-EMPTIVE IEA MOVE The IEA. its executive director said on Tuesday. Leading exporter Saudi Arabia. which holds most of OPEC'S spare capacity. which pledged more of its own oil after the Organization of the Petroleum Exporting Countries failed to agree as a group to raise supply. The IEA was reacting to the loss of Libyan oil exports but the shortage had not been immediately felt because many European refineries had been closed for regular maintenance work in the early weeks of the conflict. so it is not really impacted by the IEA stocks. however. "We decided pre-emptively to move towards seeking a soft landing for the global energy market. (Continued on page 26) IEA says oil release a stop gap solution LONDON. Oil exporter group OPEC failed in early June to agree an increase in output which its Gulf Arab members and the IEA had hoped would help maintain long term demand for oil by helping sustain economic growth." Khatibi said.A high level of emergency stocks enabled industrialised nations to divert their purpose to support a fragile economic recovery rather than to handle severe oil supply disruptions. June 28 (Reuters) . still smarting after its June meeting which ended in disarray. "We are just filing the gap -. "There are absolutely no concerns in regard to the supply of oil by this organisation. will release 3.GERMANY." he said. "It's a pre-emptive use.6 million bpd. said it would produce as much oil as needed after the talks in Vienna collapsed on June 8. but also the serious threat of disruption." Tanaka said. a diplomatic source said. South Korea. Its previous two interventions were a reaction to Huricane Katrina in 2005 and a 1991 release due to the Gulf War. REUTERS/Jo Yong-Hak .RESERVESRELEASEMARKNOW OIL FROM GOLD. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. but now we are very sure this tightening of the market will happen in July. IEA's move meant to send a shock wave to the market By Muriel Boselli PARIS. "Clearly the serious threat is there. Tanaka said he was in regular contact with leading OPEC producer Saudi Arabia. Kuwait's oil minister said on June 20 the world's fourth largest oil exporter was producing an average of 2." the Gulf delegate told Reuters on Tuesday.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE The IEA group of industrialised nations announced last Thursday it would release about 2 million bpd of oil from emergency stocks over 30 days to boost supply and drive down crude prices. He reiterated that the current stocks release was for 30 days after which the agency would reassess the market. "This disruption from Libya did not come up to the surface. "We are simply saying we will just fill the gap before OPEC or Saudi is going to produce supplies for the market." Tanaka said he was confident Saudi Arabia would produce more.The IEA's release of oil stocks was a temporary measure to fill a supply gap before extra Saudi Arabian production emerged. Its OPEC governor Mohammad Khatibi told an official website on Tuesday that the oil market was balanced and there no need for OPEC to call an emergency meeting to reassess supply. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR.44 million bpd. in that way this is a new mechanism. as a member of the 28-nation IEA.70 million bpd of crude. has sparked a sharp response from OPEC. saying on Monday that he saw no reason for it. coordinated by the International Energy Agency. June 28 (Reuters) . OPEC Secretary-General Abdullah al-Badri has called for an immediate halt to the IEA oil release. August when refinery maintenance is over. "We think Saudi Arabia has about 3 million barrels per day" of spare output capacity. The surprise move by major consuming countries to drive down oil prices in a bid to boost economic growth was condemned by OPEC producers as unecessary." A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27.

" the European diplomatic source added. "Discussions started then but there was no decision taken at that point because we had to see what would happen from the producers' end with the OPEC meeting. (Continued on page 27) Police detain a supporter of imprisoned Russian oil tycoon Mikhail Khodorkovsky during a gathering in central Moscow June 26. which was convergent between us and the Americans." he added. founded in 1974 following the Arab oil embargo. Gulf. opposed a Saudi proposal to pump more oil. "The proposal came from the U." The source said the stocks release amounted to a fundamental shift at least on this occasion and that had only been possible because stock levels were high. REUTERS/Tatyana Makeyeva . "Our analysis. The source confirmed comment from U. including Iran. And it's not the case this time. although Saudi Arabia has said it will produce whatever the market needs in any case." he said. around the end of May.S. a news conference was called in Paris. IEA's executive director Nobuo Tanaka said on Tuesday the release was a temporary measure to fill a supply gap from missing Libyan output before extra Saudi Arabian production emerged. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE Consuming nations agreed last week to release oil from emergency stockpiles for only the third time in history. That is less than 4 percent of the total of emergency stocks held by the 28 countries of the IEA." the source added. knocking around six percent off international benchmark Brent crude and providing some relief for a fragile world economy. has only previously released emergency reserves in 1991 at the time of the first Gulf War and in 2005 after Hurricane Katrina ripped through oil infrastructure in the U. Only three hours later at 1300 GMT.-led plan gained real momentum after a failed OPEC meeting earlier this month. where IEA Executive Director Nobuo Tanaka announced the 60 million-barrel release." Tanaka said. 2011. in that way this is a new mechanism.RESERVESRELEASEMARKNOW OIL FROM GOLD.S. but it was only approved by all 28 of the International Energy Agency's 28 members by midday European time on Thursday. They still exist. We had margins of manoeuvre for this extraordinary operation. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. Some of the sell-off since the April high was driven by expectations of reduced demand in the United States and other Western nations where fragile economies are ill-placed to cope with the strain of expensive oil. "To be clear we did not divert strategic stocks from their initial aim. officials that the U. Discussions over the supply release began in earnest in May. "We decided pre-emptively to move towards seeking a soft landing for the global energy market.S. Some analysts have said the impact this time could be muted because of the strength of Asian demand. OPEC failed to reach agreement after seven members.S." The IEA placed heavy pressure on the Organization of the Petroleum Exporting Countries and threatened it would use "all the tools" at its disposal if it did not raise production. Participants held balloons with Khodorkovsky's portrait and distributed leaflets on the occasion of his birthday. The IEA. "It's a pre-emptive use. PHILOSOPHICAL REFLEXION Discussions before the release decision had been "a philoso- phical reflexion on the use of strategic stocks". Oil markets rose on Tuesday as an agreement by France to roll over holdings of mature Greek debt boosted appetite for riskier assets like commodities and helped lift the euro against the dollar.GERMANY. "It's a tool which has been designed to respond to oil disruption. was that the traditional tools were not sufficient and that we needed to create a surprise effect in the markets. The news took oil markets by storm.

" Over 85 percent expect Brent to remain below $120 a barrel by December. the respite from higher prices is not expected to last. Over 80 percent of the 30 respondents said Brent crude oil would remain below $110 a barrel over the next month. even as the impact of the 60-million-barrel inventory injection fades. Tanaka said on Friday he would like Russia and other emerging economies to join the group. Analysts also see little scope for appreciation later in the year. while investor bargain hunting would also help stabilise prices eventually. nearly a third of those polled see it below $100 a barrel. More than half said prices would come roaring back in 2012. president of Prestige Economics in Austin. "Adding 60 million barrels of oil to the market could push down near-term Brent crude oil prices by $10 to $12 a barrel. a former analyst at the IEA now at Societe Generale in New York.The industrialized world has likely capped oil prices for the rest of the year by releasing emergency reserves." said Jason Schenker. Texas. "(But) the fact that the IEA had to go to these lengths in the second year of an expanding business cycle says something very bullish about crude oil prices in the medium and long-term. (Continued on page 28) International Energy Agency (IEA) Executive Director Nobuo Tanaka attends a meeting of the CEOs of global energy companies called "New paths to energy security" at the St." said analyst David Greely at Goldman Sachs." Spreadsheet of results: ( http://r. June 17. a separate Reuters poll of official forecasts showed $110 for the third quarter. a Reuters poll found. That's even higher than the forecast $107 in the previous May poll. "We would expect the release to have less of an impact on prices further out the curve. The release is expected to act as a catalyst for stronger growth next year. and demand picks up with a recovering economy and the onset of winter in the northern hemisphere. analysts do not expect members of the International Energy Agency to find willing buyers for all the oil: most think less than 75 percent of the 60 million barrels marked for release will eventually be sold. a Reuters poll of 30 analysts and traders showed all but one believe Brent crude oil will remain below $120 a barrel through the end of the year after consumer nations released emergency reserves for the third time ever. suggesting they have bought the world economy more time to mend. ITALYAMID IEA HALFWAYON RELEASE ACHIEVED DEMAND IEA TOGLITTERSON INVESTOR.are significantly scaling back their short-term views. Even so. Brent has averaged around $111 a barrel threatening to slow a fragile global economy. Petersburg International Economic Forum.like JP Morgan -.RESERVEWEAK DOLLAR BALI MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF FURTHEROPPOSE OIL RELEASE YET RELEASE DEBATE TO FEED FOR OIL NO HOVER OIL HIGHS BOOMING ON SEVERE POWER CHINA SHINES MAY ECONOMIC GAS SPECIALTO DECIDE IN RACERELEASEMARKIEA OIL RELEASE COAL RELEASE PASSES ENERGYWOES NOW ASIA —————————.com/nuz32s ) More than 55 percent of the analysts polled said Brent would average between $110 and $130 a barrel over the course of 2012. Wittner said hedging would pick up from large consumers like airlines and industrial users once prices dropped below $100 a barrel. 2012 spike looms By Antonita Devotta and Florence Tan NEW YORK/SINGAPORE." said Michael Wittner. averaging between $110 and $130 a barrel over the whole year as the IEA's plan is seen as just a short-term balm against the pace of demand growth outpacing supplies. In May. "We would start to become a cautious buyer of Brent below $100 and would become a more aggressive buyer as Brent approaches $90.THE NEAR ASIA'S WOES DEMAND GOLD. June 27 (Reuters) . less than its peak this year in April. GRAPPLESCHINA’S OIL ANDENERGY NEEDS INENERGY MAY 2011 SILVERSILVERON OIL FROM RESERVES GOLD THAN HALF WITHSECONDANOTHERSHORTAGES JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE POLL-IEA caps oil prices this year. Besides. So far in 2011. While most analysts have not formally revised their annual forecasts.GERMANY. which is responsible for energy security in the developed world. suggesting many -. "This is price bearish for crude oil today and in the immediate term. REUTERS/Alexander Demianchuk .reuters. 2011.

and once the temporary stock release is over. which called for the producer group to increase production to meet the rising call on its crude in Q3." Barcap analyst Paul Horsnell said. the IEA will at some point have to wean consumers off the reserve release. Analysts at Barclays Capital said the IEA's decision "sends the incorrect signal" to major producers.Oil consumer nations on Thursday announced a surprise release from strategic government petroleum stockpiles in a bid to push down fuel prices and underpin the global economy. Deutsche Bank The IEA sees their release as an effort to break the market logjam. while about 10 percent expect prices between $120 and $130 a barrel. with greater availability of the former. The United States will provide half the volumes from its huge 727-million barrel crude reserve. while giving the Saudis time to gear up output and maybe buying a bit of time to see if the opposition forces in Libya can ship some oil. instigating SPR release decision." However. threatening to jeopardise consumer-producer relationships in the oil market and placing upward pressure on prices by year-end and into next year. the flow of Saudi Arabian crude could dry up. The 28-member International Energy Agency said it would release 60 million barrels a day over an initial 30 days to fill the gap created by the disruption to Libya's output. with Europe supplying 30 percent in crude and refined products and the rest from Pacific OECD nations.P.GERMANY. "The bottom line is that this release provides a welcome short-term economic stimulus at a time when the world economy could do with a boost. another former IEA analyst.5 million barrels per day. analysts say the IEA cannot use its stockpiles to keep prices down indefinitely. "Should the Libyan disruption turn into a chronic outage. and once the temporary stock release is over. WHAT THEY SAY ABOUT THE IEA DECISION Barclays Capital The IEA's decision comes primarily as a result of statements issued prior to the OPEC meeting. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. now pumping 2. (Continued on page 29) Analyst reaction to IEA releasing oil reserves June 24 (Reuters) . particularly when Saudi Arabia has restated its commitment to supply customers with the crude it needs.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE WHEN THE REBOUND COMES With the possibility remaining high that Libyan crude will not resurface in 2012. It is a risky move in our view since it is a mostly short-term fix to a problem with many long-term components. the ultimate implications of the stock release are far greater and longer term.RESERVESRELEASEMARKNOW OIL FROM GOLD. There was also something of a disguised threat in its view that should OPEC fail to oblige. Oil prices tumbled more than 6 percent on Thursday after the world's consumer nations banded together to aid the global economy by releasing emergency oil reserves for the third time in its 37-year history. 2011. "The net result will likely be lower Saudi volumes by the end of 2011. About 60 percent of the analysts and traders polled expect the price of a barrel of crude to bounce back above $110. sends the wrong signal. Vehicles queue for petrol at an Emarat gas station in Dubai June 23. While the agency had launched a new period in its history by showing willingness to use its reserves as a "weapon" in the face of higher prices. the flow of Saudi Arabian crude could dry up. "we are prepared to consider using all tools that are at the disposal of IEA member countries. tightening up balances by year-end and into 2012. tightening up balances by year-end and into 2012. While we do not disagree with these short-term effects. This left the IEA hostage to its own fortune. The net result will likely be lower Saudi volumes by the end of 2011." The IEA has indicated it may extend the crude sales for a second month if demand remains adequate and prices do not fall sharply. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. though reports suggest OPEC's largest exporter was consulted by the United States ahead of the announcement ." said Lawrence Eagles at J. REUTERS/Jumana El Heloueh . the use of SPR. in our view. and its petrol consumption is estimated to be around five million litres per day. analysts still anticipate a tight market and remain bullish on prices in the coming year. Some also said the agency has risked provoking major producers like Saudi Arabia. While the IEA is correct to worry about global balances. Morgan in New York. with whom the agency has enjoyed better relations in recent years. particularly given the Libyan outage and only very partial replacement of Libyan volumes. Market participants see this as bearish for prices in the short term and potentially for light-heavy differentials. OPEC's meeting broke up without any consensus or decision. Here is a list of brokerages and their comments on the IEA move. The UAE is the world's third largest oil exporter.

as the oil would be absorbed to meet current demand. It is not enough oil to tip the long. CommerzBank The IEA cited short supply due to Libyan supply outages as its reason for the decision. Brent prices could average this year between $125/bbl and $160/bbl. It is more about market psychology and trying to shake out investors who bought oil as an asset.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE In our models. during an action in Vienna June 15.GERMANY.S. Looking into the second half of the year.S. the release of reserves probably aims at calming the oil market and oil prices in the near term. As this is not a new phenomenon. to $105-107 a barrel.Brent spread has seen a major reversal. Given the situation in the MENA. This release will ease the market initially though. to protest against Canada's tar sands development. It is about sending messages to investors and possibly to OPEC members like Iran and Venezuela. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————. Under our upside risk scenario (30% probability). in our mind. too late. the tails around our baseline are very large and we present two additional scenarios. Any abatement in growth risks would support both WTI and Brent while amplification or compounding growth risks would weigh on crude oil prices. Goldman Sachs They say we are squandering our vital reserve. we believe Brent term structure could weaken further and maintain our average forecast of $102/bbl. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR. We would expect the release to have less of an impact on prices further out the curve. REUTERS/Herwig Prammer We estimate that a 60 million barrel release by the end of July has the potential to reduce our three-month Brent crude oil price target by $10-12 a barrel. the IEA's decision could prove to be a boomerang. we think a still firm underlying oil market structure may see both need to see that. the timing of the measure suggests it is firstly a reaction to OPEC's lack of willingness to increase production quotas and. In the medium term. the IEA may be tempted to extend the draw for an additional 30 days. In this third release (Strategic Petroleum Reserves). It the IEA's supply injection. prospects of growth have (MENA unrest. we think near term crude oil prices may see further downside corrections towards $101/bbl in Brent & $85. In our downside risk scenario (15% probability). Thursday's announcement may have limited downside impact on oil prices in the medium to longer term picture. BofA Merril Lower oil prices will bring immediate relief to consumers. 2011. must really be much closer to exhausting their spare capacity than is commonly believed for them to approve of this move.In our view. we believe the crackdown in OPEC cohesion cannot be a bullish signal for oil prices.decelerating U. secondly. global oil demand has been on a pretty sharp decelerating path across the OECD region since growth peaked in 4Q10. Gain Capital The IEA's decision is likely to keep pressure on crude oil prices into the end of the first half of 2011. economic recovery. Accordingly.RESERVESRELEASEMARKNOW OIL FROM GOLD. In fact. and many EMs have also started to reduce their oil intake. However. data surprises. Dire bears said that the economy must be in much worse condition than anyone knows for the government to turn to the IEA and SPR to agree to release oil together. front-tothree month Brent timespreads have already come down by $0. & EZ sovereign debt concerns) are likely to be the wild cards that determine medium to longer term oil price direction. OPEC output must grow sharply again in 2012. However. while the WTI. Overall. An employee of a company producing and selling natural cosmetics is covered with a molasses representing oil. China 'hard landing' fears. but it could have been enough to change the psychology.term supply-demand balance. we would expect that the potential impact on Brent crude oil prices in 2012 to be closer to $5-7 a barrel on average (Continued on page 30) . Net. as it is now questionable whether Saudi Arabia feels tied to its pledge to boost its output in the short term to 10 million barrels a day. but at some point we expect that fundamentally tighter markets will force the IEA to surrender to higher prices. though. as well. As strategic reserves are merely meant to ease physical bottlenecks. Cameron Hanover The release of barrels from the SPR and IEA is not really about supply. but to us this IEA release comes too little. the ongoing Greek debate. prices could average $100/bbl in 2011. Bulls countered that the Saudis crude oil benchmarks resume their primary uptrends.00/bbl in WTI on the back of We will not know if this was a brilliant move or a mistake until we see what happens with prices for more than a day. In the medium term. this would contradict with its actual purpose. but we recent stream of negative U. and the could potentially breathe some life into the economy.73/bbl.

(Continued on page 31) OPEC Secretary-General Abdullah El-Badri. led by Saudi. it is clear that consumer countries are prepared to fill the projected 3Q2011 oil supply gap and want to see a lower oil price. Eurasia Group We see this course of action as a response by OECD governments. whether from industry or government reserves. effectively restoring the forecast we had before the disruptions to Libyan production and exports. Prestige Economics While this is price bearish for crude oil today and in the immediate term. Georgia's Prime Minister Nika Gilauri. REUTERS/Heinz-Peter Bader . consistent with our view that the US S&P 500 will hit 1200. the result on Thursday was fresh falls in equities and commodity prices. but also as an injection of stimulus into the world economy. a support for deferred price and structure.GERMANY. 2011 in Vienna. We expect more of the same over the rest of the year. releasing emergency inventories is a last resort.gap due to insufficient global supply.RESERVEWEAK DOLLAR TO SHINES PASSES ENERGY WOES MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE JPMorgan The 60 mb OECD strategic oil inventory offer coordinated by the International Energy Agency should be seen not only as a stop. An inventory draw. and results in a significant shift in world oil pricing dynamics in the third quarter. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSE ANDENERGY NEEDS IN GOLD GLITTERSON INVESTOR.RESERVESRELEASEMARKNOW OIL FROM GOLD. probably spurred by the Obama administration. If pursued rigorously. Kazakhstan's deputy Prime Minister Yerbol Orynbayev and Austrian energy group OMV's CEO Gerhard Roiss (L-R) attend a panel discussion at the World Economic Forum in Vienna. The World Economic Forum on Europe and Central Asia takes place from June 8 to 9. these measures are being implemented with the intent to stave off significantly higher prices in the nearand medium-term. would raise output regardless of the formal ceilings. with the dollar regaining ground. 2011. is a draw nonetheless. After all. The global economy is up against a wall in terms of receiving additional oil supplies to meet demand. to the rising concerns about the slowdown in economic growth. Capital Economics Our view has always been that oil prices would fall anyway given the deteriorating prospects for demand and the likelihood that some OPEC members. If government reserves are to be replenished. the 60 mb sale over 30 days is a sufficient volume to cause a very substantial drop in the oil price. The fact that the IEA had to go to these lengths in the second year of an expanding business cycle says something very bullish about crude oil prices in the medium-and long. Brent crude will be back below $90 a barrel. ITALYAMID IEA HALFWAYONRELEASE ASIA ENERGY DEMAND IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF ASIA OIL INDUSTRYCONFERENCE IN KUALA LUMPUR SAYSPDF ON DEBATE HIGHS YET RELEASE MAY ECONOMIC RELEASE OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL THE RACE TO OIL GAS CHINA RELEASE ENERGY AGENCYWOES IEA OIL SPECIALTO DECIDE IN NEAR ASIA'S TOBOOMING RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR DEMAND —————————.term. June 9. Amidst the uncertainty it creates. Morgan Stanley The availability of 60 mmb of reserves presents a downside to our $120 a barrel price forecast for 2011 of some $10 a barrel. demand will be higher (just as supply is higher today). We have therefore lowered our 3Q2011 price projection to $100/bbl from $130/bbl. Additional demand or supply disruption would have a massively bullish impact on prices. and in safe haven government bond yields. Overall. The IEA release is likely to stimulate more gasoline production particularly in the PADD I/East Coast markets where refiners have been negatively impacted by the tightness in Brent-type light sweet barrels.

" The analyst team stopped short of an official price revision. one of the most influential banks in commodities." J. "IEA countries have replaced OPEC as the supplier of the marginal barrel to the market. to $105-$107 a barrel. led by David Greely in New York. J. GOLDMAN IN COMMODITIES Goldman rocked commodity markets in April when the longterm price bull suddenly turned cautious on the outlook. saying they wanted to know whether the release would be through a direct sale of crude and oil products from IEA member countries or whether they would operate an exchange.08 a barrel. which would leave more uncertainty over when the government would choose to refill the SPR (U.S.10 a barrel. J. Goldman.RESERVESRELEASERELEASE TO RELEASE PASSES AGENCY TO MAY 2011 JULY 2011 JUNE 2011 JUNE 2011 JP Morgan. June 24 (Reuters) . with significant pricing power conferred to the U. Morgan cut its average forecast for Brent crude to $100 a barrel in the third quarter.S. down from its previous projection of $130.P. Goldman Sachs . Morgan analysts said the offer of strategic oil inventory "should be seen not only as a stop-gap due to insufficient global supply.GERMANY. "If pursued rigorously. J. the 60 million-barrel sale over 30 days is a sufficient volume to cause a very substantial drop in the oil price. said.P. Strategic Petroleum Reserve). Brent crude rose 84 cents to $108. Morgan analysts led by Lawrence Eagles said in a note to clients late on Thursday. In a note to clients.Bankers J. U. Morgan and Goldman Sachs slashed forecasts for crude prices in the third quarter after the International Energy Agency announced the release of 60 million barrels of oil next month to shore up the economic recovery. ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF YET RELEASE MAY SECOND OIL FOR OIL TO DECIDE ON OIL INTERNATIONAL ENERGY OIL RESERVE RELEASE —————————. as the oil would be absorbed to meet current demand. By 0111 GMT. Morgan said the new forecast was the same it had before the disruption to Libyan supplies.P. Net. we would expect that the potential impact on Brent crude oil prices in 2012 to be closer to $5-$7 a barrel on average. but also as an injection of stimulus into the world economy. "We would expect that if the emergency release is implemented through an exchange program there will be less of an impact on crude oil prices for 2012 and beyond than if it is implemented through a direct sale.P. Goldman's energy team. expects Brent prices to fall to $105-$107 a barrel by the end of July. cut oil price forecasts after IEA SINGAPORE. Oil bounced back a dollar on Friday after tumbling to a fourmonth low in the previous session on news the world's top consumers planned to release emergency oil reserves for only the third time ever. after settling at its lowest since February on Thursday. . Morgan said. crude gained $1. and result in a significant shift in world oil pricing dynamics in the third quarter"." "We would expect the release to have less of an impact on prices further out the curve." the note said.S.P." J. 2011. (Continued on page 32) An employee of a company producing and selling natural cosmetics holds a Canadian flag as he stands in oil puddle to protest against Canada's tar sands development during an action in Paris June 15. by virtue of its large contribution to the release pool. "We estimate that a 60 million barrel release by the end of July has the potential to reduce our three-month Brent crude oil price target by $10-$12 a barrel.06 to $92.P. saying speculators had pushed prices ahead of fundamentals as Brent crested a post-2008 peak near $125 a barrel.

Obama has spoken with the Saudi King at least twice. consumer pockets and help deliver growth in the 2. The plan to tap U. who called it an ill-timed misuse of stockpiles that risks leaving the government with less ammunition should a deeper supply crisis emerge." said IEA Executive Director Nobuo Tanaka. The previous two releases followed abrupt shortages caused by the first Gulf War in 1991 and by Hurricane Katrina in 2005. pushing retail gasoline prices in the United States to $4 a gallon.reuters. (Continued on page 33) Industrial nations tap oil reserves to boost growth By Muriel Boselli and Roberta Rampton PARIS/WASHINGTON. or just less than Iraq produces. just before the Libyan conflict began. and drew fresh warnings about using strategic stockpiles. pointing out that world stockpiles are at high levels by historical standards and the impact is relatively small. Its current three-month forecast is $117 a barrel and its forecast for 2012 is $130 a barrel. While Brent crude peaked at $125 at the end of April. The decision risks aggravating OPEC.5 percent over the next 30 days. the bank again turned bullish and said the large correction provided a good buying opportunity. Lower energy prices should provide relief for the sluggish U. "I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy. the same day that U. it has since fallen sharply. It represents less than one day's worth of global consumption. OPEC's non-Gulf members blocked efforts to raise output. June 23 (Reuters) .S. The American Petroleum Institute." said John Kilduff. the administration official said. Greely told Reuters on Wednesday that while a large production increase from Saudi Arabia could limit the size of any global stock draw in the second half of this year. The unexpected decision to release 60 million barrels over the next month." a senior official told Reuters. emergency oil reserves had been under way for nearly two months. "NOT SURE WE NEED MORE OIL" In Washington. Graphic-US strategic reserves: ( http://r. . "It represents a reach by member countries for the remedy of last resort to high oil prices. who questioned the timing given oil prices have already fallen some 20 percent from their May peak. "I'm not sure we need more oil. But analysts questioned the need. oil analyst with Credit Agricole. Obama drew immediate criticism from the oil industry and Republicans." said Eurasia Group analyst Greg Priddy. and threatens to widen a rift with OPEC just weeks after the cartel failed to raise output. economy.S. where household budgets have been constrained by high gas prices. though it will raise the global oil supply by 2. up from 1. officials agreed to hold off until after OPEC met on June 8." said Christophe Barret. oil prices peaked at nearly $115. Oil prices have risen 20 percent over the past year. but by late May. "This was done very carefully and quietly with very significant pros and cons presented. President Obama had been seriously considering tapping reserves since May 2.0 percent range later this year.com/cah48r ) TAKES STRAIN OFF CONSUMERS While the final decision to release stocks was taken only after a 48-hour consultation period with member states earlier this week. "(The) precedent that this decision creates definitely complicates the analysis of strategic stockpile impact on the oil market. raising its year-end Brent forecast to $120 a barrel. said the decline in oil prices should put more spending power into U.5 percent.Industrialized nations agreed to release oil from emergency stockpiles for the third time in history. The added oil will boost world supply by nearly 2. At that meeting. Chris Low. showed the deepening concern among Western leaders over the damage of high energy costs to a worsening global economy. a 28-nation agency of industrialised countries set up after the Arab oil embargo as a counterweight to OPEC. Talks were also held with other consuming nations. It will decide whether to release more oil in a month.5-3. the culmination of a plan that President Barack Obama put in motion more than a month ago. ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF MAY SECOND OIL FOR YET RELEASE PASSES AGENCY TO OIL TO DECIDE ON OIL INTERNATIONAL RESERVESRELEASERELEASE TO RELEASE ENERGY OIL RESERVE RELEASE JULY 2011 JUNE 2011 JUNE 2011 After oil prices fell in May. the move was slammed by the oil lobby and Republicans. The decision suggests a more active approach to tackling high oil prices by both the United States and the IEA. sending crude prices tumbling and providing some support to a faltering global economy.S. After Obama called Saudi King Abdullah and Kuwati Emir Sheikh Sabah al-Ahmad al-Sabah. prices are only a little higher than mid-February.GERMANY. which represents Exxon and Chevron among others. The release comes as consumers grapple with costly gasoline ahead of the peak summer holiday driving season. economist at FTN Financial in New York. and the global response was swift. In this case. Goldman is a long-term bull on oil and has said the 2008 peak of more than $147 a barrel could be surpassed in the coming years. partner with Again Capital LLC. which has long feared consumer nations will use their stockpiles to undercut their sway over prices. but President Barack Obama held off in order to consult with other consuming nations and key OPEC producers. they expected spare production capacity in OPEC to be "effectively exhausted" by rising demand in 2012. he sent a low-profile but high-powered delegation to the region to discuss concerns high oil prices would hurt the global economy and ultimately demand for oil. The International Energy Agency said the action would fill shortages caused by the Libyan conflict and get oil quickly to market while Saudi Arabia makes good on its pledge to pump more oil.8 percent seen in the first quarter. the official said. It also suggests a fundamental shift by oil-importing nations toward a more active use of their emergency reserves. it's been over 3 months since Libya's exports stopped. an administration official told Reuters on Thursday. After dropping a further 6 percent on Thursday. said the plan was "ill timed" and "makes little sense" because there was no supply emergency.S.

" Tanaka said. It's only the third time in the nearly 40-year history of the International Energy Agency that its 28 members have dug into their stash. political science professor at University of Virginia. ITALYAMID RACERESERVES WEAK DOLLAR IEA RELEASEHALF IN NEAR TO ANOTHER NOW OIL FROM RESERVES MORE PRODUCERSOF IEA HALFWAYONRELEASE ASIA ENERGY DEMAND SAYS NO HOVER OIL YET RELEASE ON SECOND OIL OIL TO DECIDE INTERNATIONAL PASSES AGENCYWOES COAL SILVEROF ENERGY OIL RESERVE RELEASE —————————. "The cascade of bad economic news is poison for a president running for reelection. While the civil war in Libya provides the latest justification." said a senior Gulf Arab OPEC delegate. While the absence of Libya's light sweet crude has caused problems for some European refineries. THAN FURTHEROPPOSE FEED FOR GOLD GLITTERS OIL FROM RELEASEMARKIEA OIL ACHIEVED TO RELEASE MAY ECONOMIC RELEASE MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE The United States will provide 30 million barrels from its huge 727-million barrel crude reserve. about 1. the IEA is releasing more oil than Libya withdrew from the market even as global demand seemed to be easing. "There is no reason to do this. the shortage has not been global and the United States looks well supplied.GERMANY. This now allows the Obama administration to claim credit for the fall in oil prices.5 days of U. NOT SUPPLY? Oil consumers and producers have been talking about surging prices for months.A new supply of oil may be filling a different kind of demand. and urged the IEA not to use its reserves as "a weapon against OPEC". June 23 (Reuters Breakingviews) . The decision appears to represent a departure for the IEA from previous emergency releases and threatens to undo two decades of cooperation with OPEC. worried that the spike could hurt the fragile world economy and ultimately harm demand. America and Europe need fiscal tightening. the IEA decision looks to have some political merits.S. Oil supply hike looks a last-resort stimulus plan By Christopher Swann and Una Galani NEW YORK/DUBAI. Costly crude has been among the leading culprits restraining growth. "But politics is about smoke and mirrors. "Our stocks release is intended to complement the action of those key producers to fill the gap. And governments are running out of ways to rev their economies. The IEA is just playing politics with the U. The world's biggest gas guzzlers are releasing 60 million barrels of shared reserves. with Europe supplying 30 pct in crude and refined products and the rest from Pacific OECD nations." Last week. OPEC Secretary General Abdullah al-Badri told Reuters the IEA was being unprofessional. Together producer and consumers will have taken concrete steps. But with other pro-growth policies exhausted. The last times were in the aftermath of Hurricane Katrina and the 1991 Gulf War. Earlier this year. there looks to be more to this decision. In particular. IEA's Tanaka said the action would work in tandem with Saudi Arabia and other Gulf Arab producers. consumption.RESERVES HIGHS TOBOOMING RELEASE GOLD. With the summer driving season getting underway. (Continued on page 34) . "The market is not short of supply. but failed to reach agreement. which earlier this month ruled out increasing its production. Kuwait and the Saudi Arabia have been raising production but there have not been many buyers. Yet rich nations have a powerful economic incentive to nudge falling Brent down even further from its $126 a barrel peak in April." said Larry Sabato. bidding to push oil prices down may be one of the few levers left for worried authorities to pull. even more than troubled Libya had been providing.S." Sabato said. The political pressure to act on oil prices has grown this year as the jump in gasoline prices hurt Obama's support as the White House was gearing up for its reelection campaign. Washington and Riyadh had discussed a swap of crude oil to try to calm the market. TARGETING PRICE.

com/mav32s ) While both Brent and WTI spreads tightened significantly following the unrest in Libya in February. which had been producing about 1.7 million barrels a day last year. Saudi Arabia. Tapping the world's emergency stockpiles absent a real emergency is risky. 2011.6 billion barrels held for emergency use -. down from a 32 cent premium Wednesday. So far. The main effect has been to erase fears about a summer shortage of seaborne light sweet crude.S. sharply down from 45 cents on Wednesday. shortly before the heavy sell off in oil markets on May 5. the impact of the stock release has been concentrated on the Brent market (where fears of shortages have been greatest) rather than WTI (where bulging inventories at Cushing and other parts of the Midwest have ensured the market is well-supplied). The premium for Brent delivered in August rather than September had shrunk to just 15 cents per barrel by 1925 GMT. and a high of 59 cents as recently as June 13. at least for nearby contracts.The International Energy Agency said on June 23 it would release 60 million barrels of oil from strategic government stockpiles held by industrialized consumer nations because of an ongoing disruption to the supply from Libya. while WTI spreads began to soften again starting in late April. explains the blowout in the spread between Brent and WTI for nearby trading months during June. Graphic: ( http://link.After the announcement. they have since diverged sharply. Some market participants have criticised the stock release and questioned whether it was really necessary. But using oil reserves as an instrument of economic policy looks a rather desperate last resort. according to the BP Statistical Review of World Energy. Iran and other OPEC price hawks have claimed the market was well supplied and there was no need for more oil. the policy has been a brilliant success." POLICY SUCCESS If the IEA's objective was to ease fears about near-term tightness in the market. It explains why Brent has led the market lower. Asian nations moved to release emergency oil stockpiles on Friday as part of a rare global coordinated action by consumer countries to prevent high energy prices from stunting a stuttering economic recovery. Fears about a shortfall of seaborne light sweet crude over the summer have been cited by the major commodity banks to justify forecasts of sharply higher oil prices during the rest of the year. benchmark Brent crude oil prices traded $5 lower to just over $109 a barrel. and the first time it has traded at a discount since mid-February. The attached chart shows inter-month timespreads for Brent and U. crushing the Brent timespreads and largely eradicating the backwardation in place since the loss of Libyan output in February. It has also been cited by many market participants as the reason why the market remains in steep backwardation and at a record premium over WTI.000 barrels of spare capacity. June 23 (Reuters) . ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF MAY SECOND OIL FOR YET RELEASE PASSES AGENCY TO OIL TO DECIDE ON OIL INTERNATIONAL RESERVESRELEASERELEASE TO RELEASE ENERGY OIL RESERVE RELEASE JULY 2011 JUNE 2011 JUNE 2011 Another bout of monetary easing by the Federal Reserve probably wouldn't help much. the IEA is using only a tiny fraction of its ammunition. -. Prices for Brent contracts nearing expiry have commanded a substantial premium over both forward months and WTI amid worries about the shortfall of light sweet oil from Libya compounded by drop in North Sea output during the summer maintenance season and the likely ramp up in European refinery throughput during Q3 and Q4. WTI crude was trading $4 lower at $91. Brent for September delivery compared with October had actually swung to a discount of 8 cents. light sweet crude futures for the remainder of 2011. Potential shortages of seaborne light sweet oils were specifically cited by the IEA as the reason for its decision to call on member countries to release 60 million barrels from emergency stockpiles over the coming month "to help bridge the gap until sufficient additional oil from [producing countries such as Saudi Arabia] reaches global markets. CONTEXT NEWS -. (Continued on page 35) COLUMN-IEA stock release crushes Brent spreads: John Kemp By John Kemp LONDON. giving less flexibility to respond to future oil shocks. The real action Thursday following the International Energy Agency's decision to order a release of emergency stocks was in the timespreads. The comparative resilience of the Brent timespreads. -. Saudi Arabia has already said it will boost output to around 10 million barrels a day. in contrast to softening WTI spreads. Brent spreads have remained exceptionally tight.44 in early New York trading.The IEA said it would release 2 million barrels a day over 30 days onto the world market to fill a gap left by Libya. As intended. Pumps are seen at a gas station in Tokyo June 24.reuters.so Thursday's move deploys less than 4 percent of their war chest.GERMANY.Forget the spot oil price. that it would lift supplies unilaterally. Member nations have 1. according to Goldman Sachs. leaving it with only 500. Deploying government reserves of consuming nations also eats into this cushion. Switching on government spigots should help provide consumers with some relief. REUTERS/Kim Kyung-Hoon . -.The announcement comes after OPEC failed to raise production at a meeting on June 8 and despite assurances from the bloc's biggest producer.

While the intervention will be intensely controversial. REUTERS/Shannon Stapleton . Many index investors and hedge funds have been encouraged to ditch long positions in WTI and switch to Brent to benefit from better roll yields. will take a more active approach to managing the market than before. It is not just physical traders. especially in the industry and among hedge funds and others running long positions in crude futures and options. as shown by the backwardation in Brent. The market called for more oil -. Some market participants have also criticised the agency for attempting to manipulate prices and questioned whether there was really the sort of immediate physical shortage of oil that justified a stock release. These worries have kept Brent futures in a steep backwardation and policymakers fear they may be contributing to the emergence of a bubble that imperils recovering economies across North America and Europe. certain segments of the market appeared tight. according to Dunand. rather than target OPEC. 2011. It is specifically designed to counter fears about a short-term supply-demand imbalance for light sweet crude oils over the peak refining period. the collapse in the Brent timespreads will have caused immense pain for many physical and paper oil traders.GERMANY. June 23 (Reuters) . ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF MAY SECOND OIL FOR YET RELEASE PASSES AGENCY TO OIL TO DECIDE ON OIL INTERNATIONAL RESERVESRELEASERELEASE TO RELEASE ENERGY OIL RESERVE RELEASE JULY 2011 JUNE 2011 JUNE 2011 While that may have been true globally. DAY TO FORGET Nonetheless. (Continued on page 36) Traders work in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange in New York June 24.The International Energy Agency's (IEA) decision to release 60 million barrels of crude oil from strategic reserves is intended to drive speculators out of the market and resist the formation of a bubble by breaking expectations about near-term supply shortages. While the IEA's decision is limited and sensible. smoothing the process of adjustment. COLUMN-IEA targets oil speculators: John Kemp By John Kemp LONDON. it can be presented as a relatively limited move in response to fears about a shortage of specific grades of crude over a short time window. particularly for the largest physical oil traders and market makers.and the agency responded. and introduces a new dynamic and source of uncertainty into oil prices. Taking positions in the time spreads is a popular strategy. Mercuria chief executive Marco Dunand told the Reuters energy summit earlier this month "My guess is we could have backwardation in Brent for the rest of this year and it might even get tighter" Many other physical traders shared the same view given the characteristics of this small and not terribly representative market. it does signal the agency. prodded by the Obama administration. since it is seen as strategy which maximises their advantages from market knowledge. But again the backwardation suggests there were genuine fears about tightness and that it was therefore appropriate for the agency to meet that specific short-term shortage of particular crude grades.

If the IEA had ordered the release of stocks in response to soaring prices in 2004 "the market [might have] worried that the stock draw was reducing our strategic reserves and providing a negative incentive to invest in new supplies or improve efficiency. PHILOSOPHICAL SHIFT The suspicion is that the decision to order the release reflects a change of personnel and philosophy -. government position has been no clearer. The IEA has traditionally opposed using stocks to blunt price rises. There clearly has been a severe increase in prices (satisfying condition 2). Gyrations in oil prices (such as the sudden drop on May 5 and equally rapid recovery) have not helped the cause of those who insist prices are driven by fundamentals. Release in such circumstances is uncontroversial." IEA Director for Energy Markets and Security Didier Houssin told the U. under pressure from the United States. "To use the reserves for price management is dangerous and would fail .S. The 1975 Energy Policy and Conservation Act (EPCA) which established the U. revolution. RESERVES PURPOSE In fact. strategic and physical on the one hand and economic on the other.pdf).for example the Federal Reserve's quantitative easing programme.pdf ). (Continued on page 37) . but push up prices substantially and threaten significant economic harm. and (C) such price increase is likely to cause a major adverse impact on the national economy" (Section 6241 (d)(2)). Commodity Futures Trading Commission. embargo.S. The chaos in Libya and the resulting shortage of light sweet crudes sits somewhere in the middle of the spectrum between physical shortages and a pure price spike. PCA states the SPR is intended to "reduce the impact of severe energy supply interruptions" (Section 6201) but that can be interpreted to cover a range of situations. making the fundamental supply/demand situation even worse. a deterrent to hostile cut off of oil imports and providing economic security. according to data published by the U. So the situation in Libyan and prospective shortfalls in crude oil availability over the summer months are squarely within the sort of situations in which the IEA and the U. businesses and consumers. Higher prices could pose a danger to the recovering economy (condition 3). (b) Releasing stocks blunts price signals and delays adjustments needed to bring supply and demand back into balance. Senate in May 2009. But the department has been cool to the idea of releases in response to purely economic concerns or acting as a price regulator ( http://www. has chosen to act this time when it was so reluctant previously. There is no risk of the United States running out of oil but the loss of Libyan output satisfies the first release condition. Smaller releases up to a maximum of 30 million barrels in total spread over no more than 60 days can be authorised to meet the adverse impact of smaller-scale disruptions including domestic shortages (Section 6241 (h)). The presidential determination must include three findings: "(A) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration.S.org/speech/2009/Houssin_US_Senate. government should consider releasing crude. and in other capitals. The Energy Department has described the SPR as the "first line of defence against disruption in critical petroleum supplies". Across the federal government.iea. and harm the ability to project military force or lead to severe domestic rationing and widespread disruption to the economy. (B) a severe increase in the price of petroleum products has resulted from such emergency situation.S. (c) Deploying stocks in response to rising prices would politicise the reserves as governments and interest groups lobbied for releases to mitigate the impact on voters.. The president has already made clear he believes speculators are to blame for exacerbating the recent price rise.particularly at the White House. Policymakers have noted the record long positions in crude futures and options built up by hedge funds and other speculators. President George W Bush and his energy advisers took a strongly pro-market orientation and were content to allow price rises to force demand rationing and rebalance the market. Intervention that was once unthinkable now has more supporters. At the other end are minor physical disruptions or imbalances between supply.S. At one end of the spectrum are severe physical disruptions (owing to war. Strategic Petroleum Reserve (SPR) sets out various conditions for releasing crude that are a complicated mix of military. there has been a marked loss of faith in the ability of markets to price assets correctly in the aftermath of the 2008 financial crisis. Opponents argue intervention is a mistake and the government should rely on price increases to ration demand and incentivise more supply. Release in such circumstances is fiercely contested. demand and inventories that do not threaten physical availability. Crude may only be released and sold following a presidential finding that "drawdown and sale are required by a severe energy supply interruption or by the obligations of the United States under the international energy program" [IEA mandated stock releases] (42 USC 77 Section 6241 (d)(1)).org/work/2002/beijing/hartpetres. ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF MAY SECOND OIL FOR YET RELEASE PASSES AGENCY TO OIL TO DECIDE ON OIL INTERNATIONAL RESERVESRELEASERELEASE TO RELEASE ENERGY OIL RESERVE RELEASE JULY 2011 JUNE 2011 JUNE 2011 VOLTE FACE? This is only the third time in its history the agency has called on member countries to make a coordinated release. But that still does not explain why the IEA.. there has always been confusion around the purpose of the reserves.GERMANY. a policy of releasing oil to counteract high prices would add an additional source for speculation. The U. or natural disaster) which leave sufficient oil supplies unavailable at any price. and a new willingness to intervene . Some production has been lost. IEA and industry objections to using the SPR to mitigate purely economic disruptions or manage price rises seem to break down into several categories: (a) Strategic stocks will be quickly exhausted if they are released to meet a fundamental supply-demand imbalance (such as excess demand growth) rather than a temporary disruption (a hurricane-related shortfall or closure of the Strait of Hormuz). President Barack Obama appears much more inclined to intervene.iea." according to Houssin (http://www.

COLUMN-IEA is the chisel.2 kg cooking gas cylinder by 50 rupees. This is intended to complement that output increase. or 7. What's interesting is that some of this oil is being offered at prices below what the Iranians are trying to get. The decision to release light sweet crudes is meant to alleviate shortages in that very specific part of the market. then the sledgehammer could be the fight between Saudi Arabia and Iran to supply Asia's crude market. an increase of about 1 million barrels a day over May production. avoiding a further draw in commercial inventories that would otherwise risk triggering a fresh round of speculation about shortages and renewed upward pressure on prices.2 trillion rupees ($26. The immediate impact from the International Energy Agency's pending release of 60 million barrels was to lower prices. bridging any near term shortfall by releasing stocks until the extra Saudi oil reaches consumer markets. Traders and refiners in Asia say additional Saudi oil is starting to make its way onto the market. The Saudis and Iranians disagreed about whether to raise OPEC's production quota at the group's June 8 meeting. leading the Saudis to say they will unilaterally boost output.If the IEA's release of strategic stockpiles can be likened to taking a chisel to high oil prices. kerosene and cooking gas cylinder in New Delhi June 25. hence the case for prices to fall.67 billion) in revenue due to sales of subsidised fuel after Friday's round of petroleum product price hikes. and resulted in untypical tightness in the Brent market.8 percent. the real cap on higher oil prices may well come as the Saudis pump more crude and offer it to Asian buyers at prices lower than what the Iranians are seeking.-SINGAPORE. This could be seen as the Saudis going after the Iranian's market share. reflected by a steep and persistent backwardation. Just how aggressively the Saudis try to displace Iranian crude remains to be seen. Yet. especially in supplying heavy crude grades to refineries in China and India.GERMANY. ITALYOIL FROM RESERVES RELEASE RELEASE IEA RELEASE FURTHEROPPOSE ANOTHER IEA OIL ACHIEVED MORE THAN HALF OF IEA HALFWAY MARKNOW OIL FROM RESERVES SAYS NO OF MAY SECOND OIL FOR YET RELEASE PASSES AGENCY TO OIL TO DECIDE ON OIL INTERNATIONAL RESERVESRELEASERELEASE TO RELEASE ENERGY OIL RESERVE RELEASE JULY 2011 JUNE 2011 JUNE 2011 The IEA was careful to welcome the decision by Saudi Arabia and its allies to increase production. kerosene prices by 2 rupees a litre and that of a 14. There is no doubt the Saudis are holding the better hand than the Iranians. The longer impact is likely to be one of sentiment. June 24(Reuters) . The Kingdom is expected to boost its output to 10 million barrels a day in coming months. Oil Minister Jaipal Reddy said. but this could easily reverse once the market realises that it only represents 16 hours of global oil demand. Indian oil marketing firms are estimated to lose 1. Saudi the sledgehammer: Clyde Russell --Clyde Russell is a Reuters market analyst. The government raised diesel prices by 3 rupees per litre. (Continued on page 38) Activists from India's main opposition Bharatiya Janata Party (BJP) take cover from a police water cannon during a protest against the price hike in diesel. which have been made worse by the gradually declining liquidity in the Brent benchmark and the forthcoming summer maintenance season. but the risk is increasingly skewed to lower prices while the Saudis and Iranians face off. The views expressed are his own. REUTERS/Adnan Abidi . There may not be enough demand for heavy oil grades to absorb the supply coming on. 2011. The public spat between the two largest producers in the Organization of Petroleum Exporting Countries is starting to spill into the physical markets in Asia. It is meant to get the market over the high-demand summer period. increasing the risks around driving prices high enough to cause concern among developed nations that their fragile economic recoveries may go pear-shaped.

sambit. Trying to put all the pieces of the oil puzzle together. which relies on oil for almost half its government revenue. is prohibited without the prior written consent of Thomson Reuters. click here Privacy statement: To find out more about how we may collect. the first time this has happened. Republication or redistribution of Thomson Reuters content.com Richard Mably (Global Editor.com Thomson Reuters commodities news briefs:          Inside Oil Inside Commodities Inside Agriculture Metals Insider Biofuels & Renewables Weekly Freight Monthly India Agriculture Monthly Oil Swaps Forward Curve Monthly Inside Dry Freight For more information: Learn more about our products and services for commodities professionals. clarence. A cargo of ESPO may even be heading to the Mediterranean. the bearish theme may well prevail. Commodities & Energy) +44-207-542-6280. use and share your personal information please read our privacy statement here © 2011 Thomson Reuters. including by framing or similar means. Commodities and Energy. SILVEROF OIL FROM RESERVES RELEASE ACHIEVED SILVERTHAN FURTHEROPPOSEINDUSTRY DEMAND FROM GOLD GLITTERSON INVESTOR.com Veronica Brown (Editor. All rights reserved. No doubt the Iranians will object to being squeezed by the Saudis.GERMANY. richard. it becomes clearer that the IEA action. But it now appears the bullish story is more of a medium. "Thomson Reuters" and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.brown@thomsonreuters. EMEA) +44-20-7542-8065. jonathan. ITALYAMID NEAR ASIA'S TOBOOMING OIL IN IEA RELEASEHALF WITHSECONDANOTHERSHORTAGES BALIRESERVES MORE PRODUCERSOF IEA HALFWAYONRELEASE ASIA ENERGY DEMAND SAYSPDF ON YET RELEASE DEBATE HIGHS OIL NO HOVER OIL ON SEVERE POWER INTERNATIONAL PASSES ENERGY WOES CHINA RELEASE ENERGY AGENCYWOES SPECIALTO DECIDE IN RACE TO OIL RELEASE COAL GRAPPLESCHINA’S OIL FEED FOR IEA OIL RELEASE —————————. .to long-term story. Throw in a couple of wild cards in the Asian crude market. for the time being. the Saudis pumping more and possibly taking on the Iranians all come down on the bearish side of the equation.com Jonathan Leff (Editor.leff@thomsonreuters. Which is course exactly what the IEA and probably the Saudis want.mohanty@thomsonreuters. Asia). Veronica. the OPEC breakdown.RESERVESRELEASEMARKNOW GOLD. That's not the case for Iran. which seems to be another piece of evidence of mounting supplies of crude available to Asian buyers. Commodities & Energy ) +65 6870 3861.fernandez@thomsonreuters. such as increasing availability of Russia's ESPO oil. and the short-term risks increase for lower prices. +65-6870-3084. Commodities & Energy. click here Send us a sales enquiry. Americas) +1-646-223-6068. click here Contact your local Thomson Reuters office. Editorial: Clarence Fernandez ( Senior Sub Editor.com Sambit Mohanty (Editor in Charge. Commodities & Energy. On the bullish side you have strong demand growth from China and India and lingering supply concerns from unrest in the Middle East and North Africa. but it's hard to see any option for them other than to lower their prices in order to maintain market share.mably@thomsonreuters.RESERVEWEAK DOLLAR TO SHINES MAY ECONOMIC ENERGY NEEDS MAY 2011 JULY 2011 MAY-JUNE2011 APRIL 2011 JUNE JUNE They have almost three times the output of oil and they can easily afford to lower prices without plunging their fiscal position into crisis.

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