Powerful energy watchdog the International Energy Agency will not order the release of emergency oil reserves if a war on Iraq stops only Iraqi exports, the head of the IEA said on yesterday.
"No, I don't think so, no, because we have had such an erratic performance in output from Iraq," IEA Executive Director Robert Priddle said in an interview.
The comments may raise eyebrows among oil traders who already are pricing a large war premium into US$30-a-barrel crude, for fear of a US military effort to oust Iraqi leader Saddam Hussein.
Iraqi supplies under the UNs oil-for-food programme have slipped this year to below a million barrels a day (bpd)
from 1.7 million bpd last year. But sales are just beginning to pick up again because Western majors are signing direct contracts for the first time in two years.
Outside the UN program Baghdad also ships up to 400,000 bpd to neighboring countries.
Its total deliveries account for about three percent of world oil trade.
Priddle also said the Paris-based agency would not order an emergency release of stocks held by its 26 industrialized member nations just to quell an oil price spike.
"We would not act simply to prick a price bubble. We would need clear evidence of an impending loss of supply," he said in the interview on the sidelines of the International Energy Forum of producer and consumer nations.
Set up in 1974 to protect energy security in the West after the Arab oil embargo, the IEA requires member countries to hold at least 90 days of inventory in case of serious supply disruption.
But its rules forbid it from intervening in the market to quell prices.
It last released stocks after Iraq's invasion of Kuwait in August, 1990 that hit some three milllion bpd of exports.
Fears are that a US attack could see Saddam retaliate against Saudi or Kuwaiti oilfields, a scenario that might well prove enough for IEA action.
Some IEA member countries are showing signs of discontent with the agency's strategy. A few EU nations want to add another 30 days of stocks and trigger an inventory release when prices go too high.
The European Commission, which drafts legislation for the EU, says it will propose the use of increased stocks to control prices. The plan may face heavyweight opposition from Britain, Germany and France.
Priddle called the idea "absurd."
He said that in the event of war the IEA expected OPEC to act first to control prices that already are near the top of the group's US$22 to US$28 target band for an index of its crudes.
"They're the producers, they actually act collectively to manage the market, so let them do it. Consuming countries would look to producing countries to act first."
Priddle's comments follow last week's decision by the Organization of the Petroleum Exporting Countries not to raise production quotas from 10-year lows. It is leaking plenty in excess of the formal limits.
OPEC ministers have given no clear commitment to preventing the sort of price spike that saw oil hit US$35 in late 2000.
The group has a formula that indicates it could pump more when prices for its basket stay over US$28 for 20 days.
But many ministers are reluctant to pump more to control prices forced higher by war fever. They argue OPEC should only act to fill a real disruption.
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