but that’s been going on since February.
So why has it taken until July for them to respond?
Perhaps it is a vote of non–confidence in Saudi Arabia’s ability
to ramp up production to its new 10 million barrel per day target.
But who in the IEA really believes Saudi Arabia could sustain that level anyway?
It hasn’t happened since the early 1970s.
...the only country capable of producing oil at that rate is Russia,
and it’s already doing it.
Other than the level of oil prices
and the resulting weakness in oil consuming economies,
what supply shock does the release redress?
How about a lack of Light Sweet Crude,
not enough refineries set up for Heavy Sour,
and Japan needing massive imports to make up for nuclear energy lost?
...There is no doubt the loss of Libyan production
has made world oil markets even tighter
but triple-digit world oil prices aren’t really about supply shocks.
They’re about the growing imbalance between ever-surging world oil demand
and little-growing world oil supply.
And that imbalance is becoming bigger all the time.
While global inventories can still bridge the gap in the very near-term,
they are hardly a sustainable solution.
...If inventories aren’t going to be depleted,
tapping reserves today means restocking them tomorrow.
When exactly does the IEA expect to take back into inventory
to rebuild the 60 million barrels that they are now adding to the market?
What’s going to change in the world demand-supply balance
that will allow inventories be rebuilt without stoking the price pressures
that tapping reserves are supposed to relieve?
The only plausible time for restocking to happen
is during the onset of another oil -induced global recession,
which, of course, the IEA may think will occur sooner than most of us yet suspect."