New IEA Chief Says No Need for Another Oil Stockpile Release
The International Energy Agency won’t ask its members to tap their emergency oil stockpiles again because supplies have risen over the summer, the new head of the energy adviser to 28 industrialized nations said.
“I don’t think there is any reason to do that given the present situation - no, no, no,” Maria van der Hoeven, the 61- year old executive director of the Paris-based IEA, said in an interview yesterday. She began her four-year term on Sept. 1, succeeding Nobuo Tanaka from Japan.
The IEA coordinated the release of 60 million barrels of oil in June to offset lost supplies from Libya, where fighting between anti-government rebels and forces loyal to Muammar Qaddafi all but shuttered the country’s crude exports. Brent crude fell 8 percent in the two days after the announcement of the intervention, the third use of reserves in the agency’s history. Prices have since recovered and are threatening to damp faltering global economic recovery.
“Three objectives were met: there is higher supply on the markets, most market indicators like forward price structure, the sweet-sour differential, refining margins have moved in a direction that should ensure better supply of markets into the autumn,” Van der Hoeven, the former Dutch minister of economic affairs, said.
Sweet-sour differential refers to the price gap between more expensive light, low-sulfur crudes and heavy, high-sulfur blends. Most of the Libyan supplies were of the prized grade.
‘Repair OPEC Ties’
The oil release came two weeks after the Organization of Petroleum Exporting Countries failed to reach an accord on production increases at a meeting in Vienna. The IEA took similar actions in 2005 in the wake of Hurricane Katrina and during the Persian Gulf War in 1991.
One of the director’s biggest challenges will be “to repair ties with the producing countries, and in particular, with OPEC,” Claude Mandil, a former IEA chief, said by telephone from Saint Quentin-de-Chalais, France, Sept. 6. Mandil, who held the agency’s top job from 2003 to 2007, currently sits on Total SA’s board of directors and advises the French government and European Commission on energy issues. “A lot has to be done,” he said.
There was no need for the oil release, OPEC Secretary General Abdalla El-Badri said at that time. ``I hope the IEA will refrain from using this practice,'' he said on June 27. ``Stocks are supposed to be for emergency use only, not commercial activity.''
Rising Energy Costs
IEA members face rising energy costs amid projections that global economic growth will slow by banks such as Morgan Stanley and HSBC Holdings Plc. Brent crude has gained 22 percent since the start of the year to trade at $115.15 a barrel as of 3:56 p.m. yesterday on London’s ICE Futures Europe exchange.
“Market fundamentals remain a primary driver of price direction,” Van der Hoeven said. Libya’s production, which averaged 1.7 million barrels a day in January, won’t be restored to full levels until at least 2013, she said.
The IEA’s priority is to improve dialog with energy producers and non-IEA countries, particularly in emerging markets where fuel demand is growing, Van der Hoeven said.
“When the IEA was started it really was a rich man’s club of oil-consuming countries of established, industrialized democracies,” she said. “It still is, but the world is changing. There will be new established and industrialized democracies in 10 years or more so you have to see to it that you have good open contacts with these countries.”
The agency is unlikely to enlarge its membership to include developing nations, given the requirement of members to join the IEA’s parent organization, the Organization for Economic Cooperation and Development and the need for members to hold a certain level of emergency oil stockpiles.
Van der Hoeven is at least the second woman to lead an international organization this year after Christine Lagarde was appointed managing director of the International Monetary Fund in July. The IEA itself has been led by a woman once before, Helga Steeg of Germany, between 1984 and 1994.
“It doesn’t matter whether you are a man or a woman, it just depends on how you go about your job,” Van der Hoeven said. “I know quite a number of people I am going to work with now because they are former colleagues or I met them during working visits with the various countries so that gives me an advantage.”
Nobuo Tanaka, who finished his term as director last month after overseeing the stock release, said the post was enjoyable and stressful.
“The best thing about the job is that energy security is so important and there’s a lot of focus on what the executive director says,” Tanaka said in a phone interview yesterday from Tokyo, where he is consulting on nuclear energy for the Institute of Energy Economics, Japan.
“She may make a certain impact on the global economy but at the same time that is a disadvantage. If you make sloppy words that has a messy impact on the markets,” he said.
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