A release of crude stocks from the US strategic reserve would be driven by political considerations not just economic ones, Mine Yucel of the Federal Reserve Bank of Dallas said Tuesday on the sidelines of the International Association for Energy Economics conference in Venice.
Referring to the impact on crude oil prices of US and EU sanctions against Iran, she said a strategic release of stocks should be used for "surprise" supply disruptions rather than to affect the results of policies that could be foreseen.
According to the International Energy Agency's policy on emergency releases of oil stocks, such action is designed "to mitigate the negative impacts of sudden oil supply shortages by making additional oil supplies available."
It adds: "Although supply shortages may bring about rising prices, prices are not a trigger for a collective response action...the goal of the response action is to offset an actual physical shortage, not react to price movements."
"It's a very political season in the US," Yucel said as the US presidential election campaigns head into the final straight.
She noted that crude oil prices had risen substantially since June, just before the latest round of US and EU sanctions came into effect.
Although there are other supply issues, such as a lack of Sudanese output and maintenance in the North Sea, the loss of Iranian barrels to the market as a result of sanctions was the biggest supply-side issue, she said.
International crude oil marker Dated Brent averaged $113.37/barrel over August, up from an average of $102.59/b in July and $94.84/b in June.
Yucel also questioned whether a release of strategic stocks would have the desired impact, pointing out that the volume that could be released would decline, while sanctions would be upheld as long as the EU and US wanted to keep them.
She added that geopolitical tensions with Iran may also have created some "precautionary demand" on the part of buyers, helping to push crude prices higher, adding that the economic impact for all net oil importers had been negative.
