According to this report in Bloomberg by Wael Mahdi, Saudi Arabia “may not increase crude oil output to 10 million barrels a day in July as it intended, as the International Energy Agency’s planned stockpile release of 60 million barrels will keep the market “well supplied” during the month. The report cites analysts at Barclays PLC and NGP Energy Capital Management.
If true, Saudi Arabia’s willingness to hold back on oil in the event that the IEA releases some from its strategic reserves would negate the positive benefits from such a release.
However, Saudi Arabia appears to be offering to lift output only “if needed,” and may increase output even if the IEA releases the 60 million barrels, according to this report in MarketWatch, which cites an unnamed Gulf Official. The official was quoted as saying that “Saudi Arabia will still increase its output to meet any expected demand in the market regardless of the IEA release of emergency stocks.”
Meanwhile OPEC officials, mostly from the anti-Saudi/Western energy-aligned interests like Iran, have attacked the IEA’s decision. According to this report in upstreamonline.com, Opec Secretary-General Abdullah al-Badri told Reuters that he hopes “this practice will be stopped and stopped immediately,” speaking about the oil release.
Though the impact on oil prices is far from certain at this time, some are predicting that the IEA release may have a very positive effect on the US economy. Energy industry veteran Daniel Yergen, with the IHS-Cambridge Energy Research Associates, said that the IEA release is “being used as an economic stimulus measure that will serve as a “tax cut” for consumers if it’s successful in driving down prices,” according to this Bloomberg report.
Americans do not desperately need, but sure could use, lower gas prices. As evidence mounts that the US economic recovery is not as strong as previously thought heading into an election year in 2012, the Obama Administration is interested in keeping gas prices lower – a goal shared with the Saudi government.