A Closer Look – Saudi Arabia Leads OPEC’s Decision to Ditch IEA Data

© Reuters. The OPEC logo at the organization’s headquarters in Vienna, Austria. Photo from the Reuters archive.

By Maha El Dahan, Dmitriy Zhdanikov and Alex Lawler

DUBAI (Reuters) – A decision backed by the OPEC+ group to stop using data from the International Energy Agency, the Western energy watchdog, reflects concerns about U.S. influence on the data, increasing tensions between Riyadh and Washington, informed sources said.

The OPEC + group, which includes the Organization of the Petroleum Exporting Countries (OPEC) as well as Russia and other producers, has so far ignored Western calls to increase production in an attempt to bring down prices, which are currently around 100 a barrel.

This is a sensitive issue as soaring energy prices, partly due to Russia’s war with Ukraine, has fueled inflation while US President Joe Biden faces pressure to cut US gasoline prices ahead of November’s midterm elections.

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

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

A White House spokesman declined to comment.

In light of this, the six-hour OPEC+ technical discussions in March ended with a unanimous decision to drop IEA data when assessing the state of the oil market.

The sources said that Saudi Arabia and Russia co-chaired the meeting, which was attended by representatives from Algeria, Iraq, Kazakhstan, Kuwait, Nigeria, the UAE and Venezuela.

The decision is largely symbolic, as OPEC+ can always choose the data it uses from six non-OPEC sources when forming its view on balancing supply and demand in the oil market.

Six sources said that OPEC + officially dropping these data indicates growing dissatisfaction with what the group considers the bias of the International Energy Agency to the United States, its largest member.

In particular, the sources pointed to the agency’s upward revision to the historical demand level in February and its estimate of the amount of Russian oil the sanctions would take out of the market, which the group deems excessive.

“The IEA has a problem of lack of independence, which translates into a technical problem related to the assessment,” a source directly involved in the decision told Reuters.

The sources spoke on condition of anonymity due to the sensitivity of the matter.

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

One source went so far as to describe the situation as a “cold war” and blame the International Energy Agency for triggering it.

The International Energy Agency told Reuters that the analysis of its data is politically neutral.

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

“The oil market report includes supply and demand data and stocks from official sources, supported by estimates when data is not available,” she added.

Born from the womb of a crisis

The International Energy Agency was established in 1974 to help industrialized nations deal with the oil crisis after the Arab oil embargo slashed supplies and pushed up supplies.

The agency, which has 31 industrialized member states, advises Western governments on energy policy, and the United States is its largest funder.

The agency has witnessed changes in the oil markets since its establishment, and its relations with OPEC have gone through ups and downs.

Even before tensions escalated this year, a turning point occurred for Saudi Arabia and its ally, the UAE, when the agency released its report ahead of UN climate talks in Glasgow late last year.

In its report, the agency said that if the world is serious about achieving net zero emissions by 2050, no new investments should be directed to oil and gas projects.

The sources stated that this exacerbated the OPEC + group’s fears that the agency was ignoring the volume of demand in the medium term, and the group opposed the agency’s demand to pump more oil in order to lower prices to suit the West, at a time when it considered that the market had adequate supplies.

In addition to the comments of the sources, some from within OPEC criticized this explicitly.

At a conference on the sector in March, UAE Energy Minister Suhail Al Mazrouei asked the IEA to be “more realistic” and not release misleading information.

* Modify base grade

The International Energy Agency surprised the oil market in February when it revised up its base estimate for global demand by about 800,000 barrels per day, just under one percent of the global oil market of about 100 million barrels per day.

Analysts said the review, which followed an upward reassessment of petrochemical (SE:) demand in China and Saudi Arabia through 2007, leads to a view that the oil market’s balance is more delicate than previously thought, reinforcing the claim that OPEC should try to increase production quickly. Larger.

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

The International Energy Agency stated that the disruptions caused by the pandemic made it difficult to obtain accurate figures and that it published the revised data as soon as the information became available.

“The IEA has noted for some time a growing mismatch in both observed and implied changes in inventories, and the revision of our historical oil demand estimates included in the February report has gone a long way in closing that gap,” the agency added.

The sources said that the expectations of the International Energy Agency on the impact of sanctions on Russian production has drawn criticism from within OPEC as it aims to press for an increase in the organization’s production.

The International Energy Agency has indicated that Russian oil production may fall by 3 million barrels per day from April, while trading companies such as Vitol and Trafigura have said that Russian oil exports may fall by 2-3 million barrels per day. According to estimates by Russian analysts and data, Russian oil production fell by less than one million barrels per day in early April.

“We based our initial assessment of exports on statements from a number of companies that have already announced that they will reduce or reduce their purchases of Russian oil, but we have noted increased interest in discounted oil, which could offset this,” the IEA said.

“As we have indicated, given rapidly changing circumstances, the estimate is under ongoing review and will be adjusted as necessary.”

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

Both Saudi Arabia and the United Arab Emirates, which hold the bulk of spare capacity within OPEC, said that OPEC + should stay out of politics, and at a monthly meeting at the end of March the group agreed to commit to a modest monthly increase that had been planned in advance.

President Biden and his allies argue that more supplies are needed to bring prices down. The United States announced that it would release up to 180 million barrels of oil from its Strategic Petroleum Reserves.

The International Energy Agency said last week that it plans to release 120 million barrels of oil over six months.

(Additional reporting by Maha Al-Dahan, Dmitriy Zhdanikov, Alex Lawler, Ahmed Ghaddar and Rowena Edwards – Reporting by Lubna Sabry and Ahmed Maher for the Arabic Bulletin – Editing by Mustafa Saleh)

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