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Oil Stock Release

Volume 530: debated on Thursday 23 June 2011

The UK today joined its partners in the International Energy Agency (IEA) in releasing oil stocks to the market. A total of 60 million barrels of oil will be made available to the market over the next 30 days, with the UK contributing some 3 million barrels.

Violence in Libya and Yemen has disrupted the global supply of oil, and we expect the loss of Libyan light sweet crude production to continue for some time. Low seasonal demand has enabled markets to cope so far with the loss of production. However, we expect the market to come under increased pressure in the coming months due to the normal seasonal upturn in demand. The action taken today will help ensure that the market does not tighten further. The global economy is still emerging from recession, and it is essential that this recovery is not endangered by oil supply disruptions or shortages. Volatile oil prices damage the economy of every country. The impact is disproportionately high on the poorest countries in the world, who are most vulnerable to rises in energy prices and the knock-on impact on food prices. Adequate volumes of oil must be made available at a price acceptable to both producers and consumers.

Earlier this month Saudi Arabia and other Gulf states committed to increase oil production to supply whatever the market needs: this is a helpful action by responsible producer nations, and we believe it will ensure the oil market is adequately supplied in the coming months and beyond. The stock release is designed to complement the action by Saudi Arabia and other Gulf states by making available light crudes and refined products. The stock release will help prevent short term supply disruption driving a more volatile oil price, that could damage the UK economy and threaten the global economic recovery.