Oil Price after the world took the IEA's painkiller - high price ahead

By Shahab Sabahi

Energy and Environment - Policy analysis research group

Look graph below. It displays that the International Energy Agency, IEA's
painkiller did not work. On June 22nd after IEA announced its members'
commitment to a contingency release from the strategic petroleum reserves
caused the price of Louisiana Light Sweet (LLS), which is the type of oil
held in the Strategic petroleum reserves, to fall $7 in a week. The
price-fall was short lived and returned to its pre release level again last
week.

I discussed in my previous post, this move would have a temporary effect on
the oil market. Furthermore the US was the only country of twelve involved
in the IEA action to exclusively release crude for general sale to the
public. Now traders have the option of storing oil and selling it to
refiners later when prices rise. Even though storing oil on offshore
tankers, as a general practice by traders is expensive, some of the trading
companies have their own mass storage facilities to manage the costs in long
run.
Now price bounced back high and most likely higher in future (storage
effect) raise the question of why the IEA allowed traders to bid in the
auction process. The US energy department says its policy is not to
discriminate between different purchasers. Other governments involved in the
IEA release either selling their oil directly to industry, or only selling
refined retail products such as diesel or jet fuel, rather than crude (the
economist).
Does it not show the IEA's is inharmonic? It would have been better the IEA
performed a policy analysis before making such an immature decision.