The IEA Secretariat completed its 30-day review of the Libya Collective Action launched on 23 June. The review concluded that “the Action served a market need by adding liquidity and bridging the gap to additional supplies from OPEC countries.”
The IEA pointed out that it will “continue to closely monitor market condition,” and that it would be “ready to augment the Libya Collective Action if market conditions again warrant. While we are not now seeking the release of additional stocks, the Action is not yet complete as stocks are still entering the market.”
The Libya Collective Action involved just over 2.5 per cent of public and industry obligated stocks, according to an IEA statement.
On 23 June, the IEA announced that it would release 60 million barrels of oil in response to the ongoing supply disruption of Libyan light sweet crude, an anticipated oil demand increase in the third quarter, and to act as a bridge to incremental supplies from major producers.
Market appetite for the government stocks made available has been greater than during the Hurricane Katrina Collective Action in 2005, and the measure has largely achieved its aims to date.
The IEA stated that: “the provision of extra supplies of crude, notably light-sweet crude from the US Strategic Petroleum Reserve, and products has had a number of beneficial impacts in the market.”
Sweet-sour crude differentials have narrowed overall, rendering light-sweet crudes more economic for refiners at a time of peak transport fuel demand. Tightness in prompt supply for light sweet crudes has diminished. Refining margins, notably upgrading margins, have improved, thus reducing the danger that suppressed refinery activity levels over the summer would lead to a products-driven supply crunch later in the year.
The IEA also notes a sharp rise in OPEC oil production. IEA estimates put June OPEC crude production at 30.03 mb/d, a rise of 840 kb/d from May, and a possible further rise of 150 - 200 kb/d in July.
The IEA estimates that higher OPEC production and the Libya Collective Action should substantially cover the expected 1.3 mb/d increase in the 3Q11 'call on OPEC crude and stock change'.
The IEA statement did highlight that: “a number of uncertainties remain which demand vigilance, notably the duration of the Libyan disruption, the future evolution of OPEC supply as well as the final impact of the stock release itself; much of the oil is only now entering the physical market.”
