New Delhi: Paris-based International Energy Agency (IEA) on Monday said that the world’s premier energy monitor is closely monitoring the Strait of Hormuz situation and stands ready to act if needed.
With a fifth of the global oil supplies passing through the strategic Strait of Hormuz, the IEA’s stand holds importance given that its member countries maintain emergency oil reserves equivalent to at least 90 days of net imports. This came after Iran said it seized the Stena Impero British oil tanker vessel in the Strait of Hormuz on Friday after it collided with an Iranian fishing boat. Tehran said the British vessel failed to respond to the boat’s “distress call".
This comes in the backdrop of India, the world's third-largest oil importer trying to buffer its consumers from any spike in global prices. IEA has been trying to get large energy consuming nations, including India and China, which are not Organisation for Economic Co-operation and Development (OECD) members to act in concert to counter supply disruptions.
Energy security remains paramount for India in the backdrop of the tension escalating in the Persian Gulf and the Organization of the Petroleum Exporting Countries (Opec)-plus arrangement extending its compact for production cuts at a time of supplies from Iran and Venezuela drying up. With the global energy landscape been rapidly evolving, India is particularly vulnerable as it is the world’s third largest oil consumer-- importing more than 80% of its oil requirements and around 18% of natural gas.
“IEA countries hold 1.55 billion barrels of public emergency oil stocks. In addition, 650 million barrels are held by industry under government obligations, and can be released as needed. These IEA emergency stocks are large enough to cover any disruptions in oil supply from the Strait of Hormuz for an extended period," the IEA said in a statement.
Strategic crude oil reserves allow a country to counter short-term supply disruptions. They are state-funded and meant to tackle emergency situations.
“The IEA considers that the right of free energy transit is critical to the global economy and must be maintained," IEA said in a statement and added, “The Strait of Hormuz is a vital maritime transit route for world energy trade. About 20 million barrels of oil transit each day through the Strait, or about 20% of global supply. It is also the route for around a quarter of global liquefied natural gas trade."
India has also been trying for the early release and repatriation of Indian nationals who were part of the crew of 23 people who have been detained onboard the Stena Impero, currently anchored at the Bandar Abbas port.
“Consumers can be reassured that the oil market is currently well supplied, with oil production exceeding demand in the first half of 2019, pushing up global stocks by 900,000 barrels per day. OECD commercial stocks now total more than 2.9 billion barrels, which is higher than the five-year average," the statement said.
The cost of the Indian basket of crude, which averaged $47.56 and $56.43 per barrel in FY17 and FY18, respectively, was $ 62.39 in June 2019, according to data from the Petroleum Planning and Analysis Cell (PPAC). The average price was $ 61.74 a barrel on 19 July. The Indian basket represents the average of Oman, Dubai and Brent crude.
“IEA Executive Director Dr Fatih Birol is in close dialogue with ministerial counterparts in IEA member and associate governments as well as in other major consuming and producing nations. As usual, the IEA is ready to act quickly and decisively in the event of a disruption to ensure that global markets remain adequately supplied," the statement said.