ROME/BERLIN – Germany and Italy remain opposed to a release of consumer country emergency oil stocks, arguing world markets are amply supplied despite lower Iranian crude output, senior government sources in Rome and Berlin said. German and Italian opposition creates further uncertainty about the timing of a possible drawdown of stocks after G7 finance ministers issued a surprise statement on Tuesday saying they were ready to call on the International Energy Agency (IEA) to take action. "There has been a round of telephone calls in the past few days. Since there's no unanimous agreement, there won't be any release," an Italian official said. A German official said there was "no real crisis situation now." That official said the G7 finance ministers statement simply maintained the status quo because the IEA was put on standby earlier in the year. The Italian official said the United States had requested a release and had backing from Britain and France. Finance ministers from Asia-Pacific Economic Cooperation (APEC) countries said on Thursday they would "welcome appropriate action" by the IEA when they meet next week in Moscow. The standoff between leading members of the 28-strong IEA on strategic oil stocks policy dates back to March when crude prices surged to $128 a barrel. That prompted Washington to start a round of diplomacy to get allies on board to keep gasoline prices in check ahead of November's presidential election and to prevent higher oil prices countering sanctions against Iran. Higher production from Saudi Arabia saw prices slide to $90 a barrel by June but crude has since risen back to $113, pushing the issue back up the agenda. Reuters reported earlier this month that the White House was reconsidering the plan because it was concerned that high prices would undermine the impact of sanctions against Iran's nuclear program. At the center of the argument is a debate about what IEA emergency reserves are for and under what conditions they should be used. Critics argued that there was no shortage of oil last year and that IEA reserves had been used for the first time to manage prices. Italy and Germany felt the release was not a success. Although the US sold all 30 million barrels of crude it offered at a discount rate, European countries which offered refined products fell well short of their targeted sale. The new head of the International Energy Agency, Maria van der Hoeven, is strongly of the view that stocks should be used only to counter a significant shortage, conditions she said this week that do not yet exist. "Higher prices alone are not the trigger for IEA collective stock release and at this moment we see that the crude oil market is adequately supplied," she said in an interview with Reuters on Tuesday. "The Iranian sanctions didn't come out of the blue. The market has been adjusting relatively smoothly to lower Iranian supplies over the last nine months," she said. Speaking in Helskinki Friday van der Hoeven said she had nothing to add to that statement. If the IEA holds the line against a coordinated release, Washington may decide to go it alone or collaborate with Britain and France. There have only been three emergency stock draws in the near-40-year history of the agency. Stocks were used after Iraq's 1990 invasion of Kuwait and again when hurricanes Rita and Katrina flooded US Gulf refineries and shut crude production in 2005. Stocks were not required in 2003 when the US-led invasion of Iraq shut its 2 million barrels a day but, after a lengthy debate, inventories were tapped again in 2011 during the Libyan civil war which knocked out about 1.6 million bpd. Sanctions have reduced Iran's exports by about one million bpd since the start of the year. Oil prices surge The price of oil jumped 1.7 percent Friday after Federal Reserve Chairman Ben Bernanke made clear in a speech that the central bank will do more to revive the US economy. US benchmark crude rose $1.59 to $96.21 per barrel in morning trading Friday. Brent Crude, which is used to price oil used by many US refiners, rose $1.49 to $114.14. In a speech at an annual Fed conference in Jackson Hole, Wyoming, Bernanke said the economic recovery is “far from satisfactory” but he did not give any timetable for action that might reduce borrowing costs and help stimulate growth. If the Fed reduces the cost of borrowing, it could boost demand for the energy needed to fuel growth and make oil and other commodities more attractive investments. “With interest rates near zero, people look for somewhere to put their money. One of those places is the oil market,” said energy analyst and consultant Jim Ritterbusch. Oil prices have wavered between $94 and $97 per barrel over the past two weeks, and Ritterbusch expects them to stay roughly within that range well into September. World oil demand is rising only slightly, and supplies are adequate. But continued worries over tensions between Iran and the West will keep prices from dropping. Expectations of financial stimulus programs from US and European central banks will also keep the market propped up. – Reuters
