‘Oil market likely has sufficient supply-side flexibility in 2012’

For a change, the IEA and the OPEC are on the same page. And OPEC must be proud of this moment. A consensus has emerged; there is sufficient oil on the markets for now. And this leads us to another rather ominous assumption that there is enough available capacity for Washington to play hardball with major crude exporter Iran.

For years the Paris based International Energy Agency, the OECD energy watchdog has been saying - rather insisting upon the producers, the OPEC - to open its taps. Yet, for now, it is contented with the available supplies.

In a just released analysis, the IEA conceded there was enough oil supply worldwide to prevent a price shock if Iran is blockaded this year. "The market in 2012 likely has sufficient supply-side flexibility" to adjust to any loss in Iranian volumes due to sanctions, its monthly report said. The report cited softer demand growth, the available Saudi spare capacity and the resumption of supplies from Libya, as the prime reasons for this newly found confidence within its ranks.

David Fyfe, the old familiar face at the IEA headquarters in Paris, the head of its markets division, while talking to a correspondent last week, repeated the same mantra: "We're looking at a reasonably well-supplied market for 2012," Fyfe said. Rising production in Libya, Iraq and Angola will offset unplanned outages in Syria, Yemen, South Sudan and the North Sea, he said.

This is music to ears, Fyfe!

For, until very recently, no matter what the producers did, the IEA has been adamant about the need to open taps still further irrespective of paying heed to their concerns. Only last month, the International Energy Agency warned of a summer of worries in global oil and products markets unless the Organization of Petroleum Exporting Countries introduced a substantial output increase shortly. In the report, the IEA also raised a serious question over the capacity of refiners and the keenness of OPEC to meet a 1.6 million barrels-a-day jump in oil-product demand in June. The agency also noted then that the suggestion by OPEC that there is no need to boost its production levels “appears wide off the mark.”

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