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IEA warns falling oil stocks could raise price tensions
By Adam Plowright
AFP
PARIS
Petroleumworld.com 03 14 07The International Energy Agency warned on Tuesday that global oil inventories could show the biggest fall for more than a decade in the first quarter, raising concern about renewed price tensions.
"Preliminary data suggest that OECD stocks have fallen by over 1.26 mb/d (million barrels per day) over the first two months of the year, and could be heading for the largest quarter stock draw for over ten years," said the IEA, an energy watchdog for industrialised countries.
Data for January and February show "reason to be concerned" and recent declines in crude as well as gasoline and distillate stocks bring inventories to "levels that were associated with higher and sharply rising prices last summer."
The price of crude oil hit a record 78 dollars per barrel in mid-2006, but has since fallen back to about 60 dollars.
"Tighter OPEC supply and colder temperatures in the US in February served to perpetuate the recent downward trend in OECD stocks," the IEA explained in its monthly oil market report.
The OECD area covers 30 of the world's most industrialised countries, including North America, western Europe, Japan, Australia and South Korea.Oil traders respond to changes in risk, with inventories and spare capacity in the production system seen as the two most important safety cushions for the market.
Inventories allow for a sudden shortfall in supplies to be plugged, while spare capacity enables a group of producers to increase their output to compensate for disruption in the oil exports of a peer.
A fall in stocks will therefore cause tension and tends to lead to rising prices.
World oil supply in February fell 65,000 barrels per day on average to 85.5 million bpd because of cuts by the OPEC cartel of oil producers which were only partly compensated for by increased output by non-OPEC countries.
The cartel cut its output target in November last year by 1.2 million bpd in an attempt to shore up oil prices which had begun to fall.
The 12-nation group followed up by agreeing another cut of 500,000 bpd in December which was due to begin on February 1.
The IEA said OPEC production by the 10 members bound by the quota system fell 365,000 bpd in February, taking overall output reductions to 1.0 million bpd since September last year and 1.5 million bpd since an output high point last July.
The cartel is to meet in Vienna on Thursday to discuss production policy and the IEA said it did not expect changes, based on recent comments by members.
World crude oil prices rebounded on Tuesday after the warning by the IEA.
The price of Brent North Sea crude for April delivery added 69 cents to 61.43 dollars per barrel in electronic trading on Tuesday.New York's main oil futures contract, light sweet crude for delivery in April, gained 54 cents to 59.45 dollars per barrel in electronic deals before the official opening of the US market.
"Crude futures were higher today (Tuesday) ... after bullish news from the International Energy Agency, who said that oil inventories in industrialized countries are likely to score their largest first quarter decline in over 10 years, following OPEC production curbs," said Sucden analyst Michael Davies.
Elsewhere in its report on Tuesday, the IEA maintained its forecasts for demand in 2006 and this year.
In 2007, demand is forecast to grow to 86 million bpd, a rise of 1.8 percent.
Demand last year averaged 84.5 million barrels per day, a rise of 1.0 percent from 2005.
AFP 13 1248 GMT 03 07
Copyright© 2007 AFP. All Rights Reserved.
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