June 23, 2011 / 8:58 PM / in 6 years

Analysts's reaction to IEA releasing oil reserves

BANGALORE (Reuters) - Oil consumer nations on Thursday announced a surprise release from strategic government petroleum stockpiles in a bid to push down fuel prices and underpin the global economy.

A driver reaches for a pump at a petrol station in Madrid January 21, 2011. REUTERS/Sergio Perez/Files

The 28-member International Energy Agency said it would release 60 million barrels a day over an initial 30 days to fill the gap created by the disruption to Libya’s output.

The United States will provide half the volumes from its huge 727-million barrel crude reserve, with Europe supplying 30 percent in crude and refined products and the rest from Pacific OECD nations.

Oil prices tumbled more than 6 percent on Thursday after the world’s consumer nations banded together to aid the global economy by releasing emergency oil reserves for the third time in its 37-year history.

Here is a list of brokerages and their comments after IEA releases oil reserves.

GOLDMAN SACHS

We estimate that a 60 million barrel release by the end of July has the potential to reduce our 3-month Brent crude oil price target by $10-12 a barrel, to $105-107 a barrel.

We would expect the release to have less of an impact on prices further out the curve, as the oil would be absorbed to meet current demand.

Net, we would expect that the potential impact on Brent crude oil prices in 2012 to be closer to $5-7 a barrel on average

JPMORGAN

It is important to recognize that the IEA countries will “offer” or “make the petroleum available” to theSource: IEA Oil Market Report market. That does not necessarily mean that the oil offered will be taken up... For political expediency, the IEA is unlikely to want to be seen. There is an implicit, but not yet apparent“ release price”.

PRESTIGE ECONOMICS

While this is price bearish for crude oil today and in the immediate term, these measures are being implemented with the intent to stave off significantly higher prices in the near- and medium-term. The fact that the IEA had to go to these lengths in the second year of an expanding business cycle says something very bullish about crude oil prices in the medium-and long-term. The global economy is up against a wall in terms of receiving additional oil supplies to meet demand. Additional demand or supply disruption would have a massively bullish impact on prices. After all, releasing emergency inventories is a last resort.

CAPITAL ECONOMICS

Our view has always been that oil prices would fall anyway given the deteriorating prospects for demand and the likelihood that some OPEC members, led by Saudi, would raise output regardless of the formal ceilings. Overall, the result on Thursday was fresh falls in equities and commodity prices, and in safe haven government bond yields, with the dollar regaining ground. We expect more of the same over the rest of the year, consistent with our view that the US S&P 500 will hit 1200; Brent crude will be back below $90pb.

Compiled by Soma Das and NR Sethuraman in Bangalore

Our Standards:The Thomson Reuters Trust Principles.
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