WASHINGTON: Global spare oil inventories tightened over the last two months, a US government report said on Friday, which could lend the Obama administration some support if it decides to tap emergency oil reserves as the West applies sanctions on Iran.
World crude inventories in countries other than Iran fell about 1.2 million barrels per day in July and August, due mostly to a seasonal peak in demand, said the report by the Energy Information Administration.
The report, required by the Iran sanctions law President Barack Obama signed last year, is published every two months by the Energy Information Administration. A copy of it was obtained by Reuters ahead of its publication.
The draw was smaller than a 1.6 million-bpd dip seen last year in the same time period. But any drop in supplies due to demand, in addition to a sharp decline in Iranian oil sales because of the sanctions, could give the Obama administration support to tap emergency oil reserves.
The West has applied tougher sanctions on Iran because it believes the country is trying to develop nuclear weapons. Iran says its nuclear program is for civilian purposes.
Stubbornly high oil prices of around $113 a barrel in the Brent futures market have left the administration wondering whether it should take action to give consumers relief. The White House has dusted off old plans for a potential release of emergency oil reserves as tension over Iran helps keep crude prices high.
But the head of the International Energy Agency, which is charged with coordinating use of consumer nation's strategic reserves, said last week there is no reason for a release right now as markets are “sufficiently supplied.”
The EIA said on Friday global spare production capacity was “relatively tight by historical standards” at 2.4 million bpd, steady with the last report.
Global inventories fell even as Saudi Arabia produced oil in July and August at a rate that was 900,000 bpd higher than its average rate over the last three years, the EIA said. The OPEC powerhouse is producing at higher rates as output in its rival Iran gets hit by sanctions on both sides of the Atlantic.
Obama has even more flexibility for enforcing sanctions after he signed a new law on August 10 allowing consuming countries to avoid the penalties through a combination of forcing down prices of their Iranian crude purchases and cutting their volumes of the purchases, a Capitol Hill aide said.