IEA says it stands ready to tap emergency oil stocks, OPEC sees no need

The oil drilling rig Polar Pioneer is towed toward a dock in Elliott Bay in Seattle. The rig is the first of two drilling rigs Royal Dutch Shell is outfitting for Arctic oil exploration on May 14, 2015. (AP / Elaine Thompson)

The west’s energy watchdog said on Friday it was ready to release oil stocks should the market experience shortages following Israel’s attack on Iran, drawing criticism from rival OPEC which said the statement would only create fear in the market.

The International Energy Agency, representing oil consumers, and the Organization of the Petroleum Exporting Countries, representing some of the world’s top oil producers, have in recent years clashed on global oil demand trajectories and the pace of the energy transition.

The IEA’s head Fatih Birol said that while the oil market was well supplied, the agency would be ready to act if needed, adding that the agency’s oil security system held US1.2 billion barrels of oil in strategic and emergency reserves.

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OPEC Secretary General Haitham Al Ghais criticized Birol’s statement, saying it “raises false alarms and projects a sense of market fear through repeating the unnecessary need to potentially use oil emergency stocks.”

He said there were no developments in supply or market dynamics that “warrant unnecessary measures.”

Oil prices jumped sharply after Israel launched a barrage of strikes across Iran on Friday, saying it had attacked nuclear facilities and missile factories and killed a swathe of military commanders in what could be a prolonged operation to prevent Tehran building an atomic weapon.

Oil prices were trading seven per cent higher, their biggest daily spike since 2022 when Russia invaded Ukraine.

The United States and its allies, in coordination with the IEA, last tapped emergency oil stocks in early 2022 after the Russian invasion of Ukraine, a decision that OPEC heavily criticized at the time.

While Israel has stopped short of targeting Iran’s energy facilities, market participants are wary the situation may escalate further leading to damage to energy infrastructure in Iran or its neighbors, as well as a blockade of the Strait of Hormuz.

In September 2019, Iran-backed Houthi militias in Yemen launched a drone attack on Saudi Aramco’s 2222.SE Abqaiq oil processing plant, knocking 5.7 million bpd of Saudi oil production offline and sending the oil market into a frenzy.

Iran’s diplomatic relations with its Gulf neighbors Saudi Arabia and the United Arab Emirates have improved significantly since that attack, though there are still some concerns in the region of a repeat of the Abqaiq scenario.

“Oil has already spiked ... and its ultimate landing point will likely hinge on whether Iran revives the 2019 playbook and targets tankers, pipelines, and key energy facilities across the region,” RBC Capital Markets analyst Helima Croft said in a note following the Israeli attack.

(Reporting by Ashitha Shivaprasad in Bengaluru and Ahmad Ghaddar in London, Editing by Louise Heavens and Susan Fenton)