Saudi Arabia is leading the OPEC decision to drop IEA data while breaking US ties

  • Issues include global demand revision in February
  • IEA report on energy conversion ranked
  • OPEC + members question the watchdog’s independence

DUBAI, April 12 (Reuters) – A decision by Saudi Arabia that OPEC + should stop using oil data from the West’s energy watchdog reflected concerns about the US’s influence on the numbers, sources close to the matter said, increasing the strain on the ties between Riyadh and Washington.

The Organization of the Petroleum Exporting Countries and Allies, including Russia, a group called OPEC +, has so far ignored Western calls to increase production in an attempt to lower oil prices by about $ 100 a barrel. barrel.

The issue is sensitive as expensive energy, partly due to Russia’s war with Ukraine, has boosted inflation, and as US President Joe Biden faces pressure to lower record high gas prices in the US ahead of the midterm elections in November.

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Any willingness on the part of Riyadh and its allies to help the United States has been eroded as Washington has not addressed the Gulf’s concerns about Iran at nuclear talks in Vienna, has ended its support for offensive operations by a Saudi-led coalition in Yemen and imposed conditions on US arms sales to the Gulf states.

In addition, Biden has not dealt directly with Saudi Crown Prince Mohammed bin Salman, the de facto ruler of the kingdom.

A White House spokesman declined to comment.

Against this background, an OPEC + technical discussion lasting over six hours in March ended with a unanimous decision to eliminate the International Energy Agency’s (IEA) figures when assessing the state of the oil market. Read more

The meeting was chaired by Saudi Arabia and Russia and was also attended by Algeria, Iraq, Kazakhstan, Kuwait, Nigeria, the United Arab Emirates and Venezuela, the sources said.

The decision is largely symbolic, as OPEC + could always choose which figures it uses from six non-OPEC sources when forming its view of the balance between supply and demand in the oil market.

That the formally dropped data reflects a build-up of frustration, six sources said, over what OPEC + saw as the IEA’s bias towards its largest member, the United States.

The sources cited in particular the IEA’s large upward adjustment in historical demand in February, as well as the agency’s view of how much Russian crude Western sanctions would remove from the market, which they saw as exaggerated. Read more

“The IEA has an independence problem, which translates into a technical assessment problem,” one of the sources directly involved in the decision told Reuters.

The sources spoke on condition of anonymity because of the sensitivity of the question.

The Ministries of Energy of Saudi Arabia and the United Arab Emirates did not respond to a request for comment.

One of the sources went so far as to describe the situation as a “cold war” and blamed the IEA for starting it.

The IEA told Reuters that their data analysis was politically neutral.

“The IEA strives to provide an impartial and independent view of the fundamentals of the oil market, and political considerations have never been a factor in how the Agency assesses market prospects,” it said in an email response to questions.

“The oil market report includes supply, demand and inventory data from official sources, supplemented by estimates where no data is available,” it said.

BORN OF CRISIS

The IEA was established in 1974 to help industrialized nations deal with the oil crisis, after the Arab embargo squeezed supplies and caused prices to rise.

The body, which groups 31 industrialized countries, advises Western governments on energy policy and counts the United States as its top financier.

It has seen energy markets transform since its inception, and relations with OPEC have ebbed and flowed.

Even before the escalating tensions this year, a focal point for Saudi Arabia and its close ally, the United Arab Emirates, was the IEA’s report ahead of the UN climate talks in Glasgow last year.

The report concluded that if the world was serious about achieving net zero emissions by 2050, then no investment should be made in new hydrocarbon projects.

It has exacerbated OPEC +’s concern that the IEA ignored the extent of continued demand in the medium term, the sources say, and OPEC + reiterated the IEA’s request for extra oil to lower prices to suit the West, as they felt the market was adequately supplied .

In addition to the comment from sources, some in OPEC have been openly critical.

United Arab Emirates Energy Minister Suhail al-Mazrouei, speaking at an industry conference in late March, called on the IEA to be “more realistic” and not release misleading information.

CHANGE OF BASELINE

The IEA in February surprised the oil market by revising its base estimate of global demand by almost 800,000 barrels a day, just under 1% of the global oil market of around 100 million bpd. Read more

The revision, which followed an upward reassessment of petrochemical demand in China and Saudi Arabia back to 2007, leads to a perception that the oil market is tighter than previously thought, raising the argument that OPEC should try to increase production faster, analysts said.

One of the sources said that Saudi Arabia disagreed with the reassessment.

The IEA said disruptions caused by the pandemic had made it harder to get accurate figures and that it published its review as soon as the information became available.

“The IEA had for some time noticed an increasing disparity in observed and implicit inventory changes, and the revision of our historical oil demand estimates incorporated in the February report closed some distance to close this gap,” it said.

The IEA’s predictions about the impact of sanctions on Russian production have also drawn criticism from OPEC, as they are designed to push for an increase in OPEC production, the sources said.

The IEA has said Russian oil production could fall by 3 million bpd from April, while trading houses such as Vitol and Trafigura said Russian oil exports could fall by 2-3 million bpd. Russian oil production fell by less than 1 million bpd in early April, according to analyst estimates and Russian data.

“We based our initial assessment of exports on statements from a number of companies that have already announced that they would reduce or cut their purchases of Russian oil, but noted increased interest in reduced barrels that could provide an equalization,” he said. IEA.

“As we stated, given the rapidly evolving circumstances, the estimate is under ongoing review and will be revised as necessary.”

OPEC + has so far resisted calls from the US and IEA to pump more oil to cool crude oil prices, which rose to 14-year highs after Western sanctions against Moscow followed Russia’s invasion of Ukraine on February 24, which Russia describes as a “special military”. operation”.

Saudi Arabia and the United Arab Emirates, which have the bulk of OPEC’s spare capacity, have both said OPEC + should stay out of politics, and at a monthly meeting in late March, the group struck a previous planned modest monthly increase.

President Biden and his allies have been of the opinion that much more supply is needed to lower prices. The United States has announced that it will make a record release of up to 180 million barrels of oil from its Strategic Petroleum Reserve (SPR).

The IEA said last week that it planned to release 120 million barrels of oil over six months. Read more

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Reporting by Maha El Dahan, Dmitry Zhdannikov, Alex Lawler, Ahmad Ghaddar, Rowena Edwards; further reporting by Noah Browning and Richard Valdmanis; editing by Simon Webb and Barbara Lewis

Our standards: Thomson Reuters Trust Principles.

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