Nour Malas The Wall Street Journal
RIYADH, Saudi Arabia—The International Energy Agency, or IEA, will this week discuss at a governing board meeting whether to tap strategic stockpiles of crude oil against a backdrop of continued political turmoil across the Middle East, the agency's head said Tuesday.
The IEA's members are so far undecided on whether and when they will need to tap emergency stocks in light of potential production outages in Libya, said Nobuo Tanaka in an interview.
On Tuesday Libya shut all of its ports, including those used to export oil, as tensions in the country continue. Libya's estimated 44.3 billion barrels of oil reserves are the largest in Africa. Two major European oil companies, Eni SpA of Italy and Repsol YPF of Spain, said they were temporarily suspending operations in Libya.
The IEA, which represents the governments of developed economies, the Organization of Petroleum Exporting Countries and top oil exporter Saudi Arabia had reached agreement prior to Tuesday's gathering here that producers should tap surplus production capacity in case oil supply from Libya was disrupted.
"I think we have quite a good agreement about what is the current situation and what we have to do," Mr. Tanaka said. "We agreed that if any disruption in the oil supply happens ... then OPEC will use this spare capacity. And if necessary, we use our strategic supply ... That is what we agreed, to send the message from both sides."
But IEA members had "mixed" feelings about tapping emergency stockpiles held in consuming countries, Mr. Tanaka said. "For the sake of disruption, there's a quite clear common interest."
"Under a very tightened market, even a very small disruption could trigger a very big price hike," he said. "If that is the case, should we be more flexible or more proactive in using stockpiles or not?
"This is an interesting question for our members," he said. "We have to be cautious, not to trigger by ourselves the crisis." Mr. Tanaka also said there is plenty of oil in the market and the IEA's position was to "stand by as necessary" while closely watching the situation in Libya.
The IEA will "have to carefully assess and discuss with our member governments" when to use stockpiles, a subject that will be raised at a board meeting later this week, Mr. Tanaka said. The agency, in the meantime, isn't revising its supply forecast on the Middle East situation but is working on quantifying the disruption scenario to understand how much of its stockpile it would need to tap.
"We say that if [there is] sustained disruption in a significant way, then we have to mobilize. We have to quantify the gap, and how long it will continue and then, we have to come to the decision point," Mr. Tanaka said. The decision depends partly on how much more crude Saudi Arabia is planning to pump, he said.
OPEC Secretary General Abdallah el Badri and Saudi Oil Minister Ali Naimi both declined to comment on the situation in Libya or potential OPEC action, ahead of a scheduled press conference later Tuesday.
The IEA is concerned continued political upheaval in the Middle East will deter investment in oil growth in the region, which would affect oil markets in the medium- to long-term, Mr. Tanaka also said.
"If geopolitical tension is maintained very high, continuously, then we see it is certainly a discouragement to additional investment into the region for further capacity," he said. "That certainly has an impact on mid- to long-term capacity. "If investment could be deferred, we have more serious problems in the mid-term," he said.