US diplomats are likely working to build support with International Energy Agency member countries for a release of government oil stockpiles in the event of a supply disruption in the coming months, the head of commodities research for Barclays Capital said Thursday.
"It will depend on a tactical consideration of when is it best to act," Paul Horsnell said in an interview after testifying before the US Senate Energy and Natural Resources Committee. "At the moment you have to say that a release is highly likely, but the judgment of when and why and what triggers it will be driven by circumstances and news."
Horsnell said support for a release probably does not exist now, but US talks with other oil-consuming countries might be focusing on those various circumstances that could make a drawdown necessary.
"Everyone knows that the best, most effective way is multilateral, so that does involve a process of building consensus," he said. "And that takes time."
The White House has repeatedly dismissed reports that the US approached European governments with a proposal for using emergency oil reserves to respond to high prices or to the fallout from Western sanctions against Iran.
"This option is on the table, it remains on the table, but no decisions have been made and no specific actions have been proposed," White House spokesman Jay Carney told reporters Thursday. "We obviously consult, as we have said repeatedly both this year and last, with our partners around the world and with energy-producing states. But again, there are no decisions that have been made, and no specific actions proposed."
Horsnell said the market's reaction to a stockpile drawdown would depend on countless circumstances -- timing, composition, geopolitical events. He said the market took all of the 60 million barrels of crude and products that IEA released in 2011, and it probably could have used a bit more.
"The lesson of last year was that the exercise was successful in terms of providing oil to the market when the market needed oil," he said. "In a sense, looking at its impact on prices isn't very useful. I think it's going to be the same thing here. This will be a circumstance where the major objective is to get supply through, into the market and at least stabilize prices."
Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, said in an interview after the same hearing that the very real possibility of a supply disruption makes the Strategic Petroleum Reserve an "inevitable" subject of discussion.
"It always has been and it will continue to be," he said. "We're going to be in a period in the next several months where all options are going to be looked at very carefully."
Yergin called the stockpile a "tremendous insurance policy created to deal with disruptions." He said the same questions will be asked this year about the purpose of the reserve that were asked four decades ago during its creation: "Is it there as a way to manage price or is it there to deal with disruptions and to protect GDP?"
US and European sanctions against Iran make this year's approach to the stockpile somewhat different, he added.
"This is a unique situation where the goal of policy is to reduce the flow of oil from one major oil exporter into the market," he said. "I don't think there's any precedent for it. We're sailing into uncharted seas."
The SPR contained 695.9 million barrels of crude as of February 29, about 62% of it sour and 38% sweet, according to the Department of Energy.
