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Wednesday, October 17, 2018

Growing anxiety over possible interruption to oil flows – FT/IEA/INTERTANKO

The Financial Times reports that growing anxiety over a possible interruption to oil flows from the Middle East has led to plans for stockpiling rising up the agendas of governments around the world.

While some security concerns stem from the advent of less predictable liberalised electricity and gas markets, political issues are now at the heart of policy planning, arising from the September 11 attacks, the growing Israel-Palestinian conflict and the sword of Damocles the US has hung over Iraq.

The Financial Times further reports that the most important such policy is the longstanding agreement by the 26 member governments of the International Energy Agency (IEA) to hold a minimum level of oil stocks and to share them if necessary. Oil importing countries are supposed to hold stocks amounting to at least 90 days of net imports, an obligation from which net exporters of oil such as Canada, Norway and New Zealand are exempt.

According to the IEA’s most recent data of March 2001, members hold stockpiles of 3.84 bn barrels of oil, representing 114 days of imports. Crude oil imports to the main OECD areas have declined in 2002: -1.9% Jan-April (12.3 mbd) to Europe compared to same period 2001, -8.9% to Japan (4.2 mbd) for the same period, and –4.8% to the US Jan-July (9.2 mbd) compared to same period in 2002.

The bulk of IEA stocks are held by industry, with only a few countries such as the US having 31% strategic reserves, Japan 51% government stocks, Germany 72% government stocks, and France 36% government stocks (figures calculated by using the latest IEA figures for industry stocks and total stocks).

Total OECD stocks (million barrels or mil bbls) end March 2002 in the major areas were:

N America, 1798 mil bbls or 76 days, up 95 mil bbls from March 2001
Pacific, 765 mil bbls or 97 days, down 5 mil bbls from March 2001
Europe, 1282 mil bbls or 87 days, up 13 mil bbls from March 2001

Referring to the article below, the US is now topping up its Strategic Petroleum Reserve in the Lousiana salt caverns, planning to take it from the current 580 mil bbls to 700 mil bbls by 2005, and has been calling on other countries to stockpile too.