In my weekend post on the IEA/US SPR release, I noted that this was likely to fuel speculation, as now market participants have to divine what the powers that be will do with SPR stocks going forward. As if to prove my point, the deputy executive director of the IEA made a statement so oblique and open-ended that it would do Greenspan or Bernanke proud:
The International Energy Agency could decide by mid-July whether the release of strategic oil reserves needs to be extended for a month or two, an official said.
The 28-member IEA announced last week a plan to release 60 million barrels over an initial 30 days to fill the gap in supplies left by the disruption to Libya’s output.
Richard Jones, deputy executive director of the IEA, said he believed the release would be temporary since demand would likely drop in the fourth quarter.
“We do believe it could be temporary but we have to see how the market evolves. There could be other disruptions, for example, we are compensating for the losses in Libya,” Jones said at an event in Mexico City.
A decision on whether to extend the release could be made around the third week of July, he said.
“It will be up to our member countries, they could decide to continue it for a month or two. I don’t see that we’ll need to continue it for very long because we see demand declining in the fourth quarter, so we think it’s a temporary measure.”
It could be temporary. But maybe not. We could decide to continue. But maybe not. It will depend on conditions. Could be this. Could be that. Am I making myself clear?
As mud, Jonesy.
Way to inject certainty and transparency into the process there, Mr. Jones! How many traders in Geneva, New York, Houston, London, Singapore, etc., are parsing that statement and other Delphic pronouncements coming out of the IEA? What mental models are they constructing that will use to try to predict what the IEA/US will do, and how the market will react, and how the Saudis will react, and how the IEA/US will react to their reactions, and on and on ad infinitum? What data/information will they feed into their models? How will wiggles and jiggles in that data affect oil prices?
Just what the world needs: more would-be Mandarins trying to engineer outcomes in vast, complex markets, and in the process, unleashing the creative energies and analytical skills of people whose knowledge and expertise should be put to far better uses than figuring out what said Mandarins are going to do and what effects it will have.
There may be a case for strategic commodity stockpiles: I’ve suggested one. (Hint: it’s a way of offsetting the effects of governments’ inability to commit not to interfere stupidly in markets.) I can state with metaphysical certainty that whatever that case may be, the IEA’s/US’s current action doesn’t meet its criteria.