23-05-06 High oil prices are eroding global demand growth, which should have a positive effect on world supplies, the International Energy Agency’s head said. But IEA Executive Director Claude Mandil cautioned that the long-term trend was so far unclear.
Even if demand eases, the world would struggle to cope with any severe supply disruptions as happened last year when hurricanes knocked out a swathe of production and refining capacity in the US Gulf.

The IEA, adviser to 26 industrialised nations, ordered the release of strategic stocks held by its members, which helped to lower prices from above $ 70 a barrel for US crude. Mandil said the release had been largely a success and the agency was ready to repeat its action if necessary.
The IEA only released reserves after discussions with OPEC, which at the time had only difficult-to-refine heavy crude available and could not make up for a short-fall in refined products. Mandil said his preference was always to work with OPEC.

Apart from the producers’ spare capacity, he said the IEA had some 4.1 bn barrels in emergency stocks, which could cover supply disruption running into years, though he added no government would ever want to exhaust its emergency stockpiles.
Although the 2005 reserves release was largely a success, Mandil said there were details to improve as some countries, which he did not name, had not delivered on their promise to make oil available. Also the US, whose Strategic Petroleum Reserve (SPR) holds only crude and a small amount of heating oil, needs to hold more refined products, he said.