INSIGHT-Saudi Arabia leads OPEC decision to drop IEA data as ties with US fray

* Issues include global demand revision in February

* IEA Energy Transition Report Classified

* OPEC+ members question watchdog’s independence

By Maha El Dahan, Dmitry Zhdannikov and Alex Lawler

DUBAI, April 12 (Reuters) – Saudi Arabia’s decision that OPEC+ should stop using oil data from the West’s energy watchdog reflects concerns over the influence on the numbers, sources familiar with the matter said, adding to tension over ties between Riyadh and Washington.

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

The issue is tricky as expensive energy, in part due to Russia’s war with Ukraine, has fueled inflation and as US President Joe Biden faces pressure to bring down record prices of gasoline in the United States ahead of the midterm elections in November.

Any willingness on the part of Riyadh and its allies to help the United States has eroded as Washington failed to address Gulf concerns over Iran at nuclear talks in Vienna, ended its support to the offensive operations of a Saudi-led coalition in Yemen and imposed conditions on US arms sales to the Gulf States.

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

A White House spokesperson declined to comment.

In this context, an OPEC+ technical discussion that lasted more than six hours in March ended with a unanimous decision to eliminate figures from the International Energy Agency (IEA) when assessing the state of the oil market.

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

The decision is largely symbolic, as OPEC+ could still choose the numbers it uses from six non-OPEC sources to form an opinion on the balance of supply and demand in the oil market.

That it officially dropped the data reflects a buildup of frustration, six sources said, over what OPEC+ saw as the IEA’s bias toward its biggest member, the United States.

In particular, the sources cited the IEA’s sharp upward revision to historical demand in February, as well as the agency’s view of how much Russian crude Western sanctions would take off the market, which they considered exaggerated.

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

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

The energy ministries 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 its analysis of the data was 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 prospects,” she 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,” he said.

BORN FROM CRISIS

The IEA was created in 1974 to help industrialized countries deal with the oil crisis after the Arab embargo reduced supplies and caused prices to soar.

The organization, which brings together 31 industrialized countries, advises Western governments on energy policy and counts the United States as its main financial backer.

It has seen energy markets transform since its inception, and the relationship with OPEC has had its ups and downs.

Even before tensions escalated this year, an inflection point for Saudi Arabia and its close ally the United Arab Emirates was the IEA report ahead of the UN climate talks in Glasgow at the end of Last year.

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

This exacerbated OPEC+ concerns that the IEA was unaware of the scale of continued medium-term demand, the sources said, and OPEC+ bucked at the IEA’s request for additional oil to make lowering prices to suit the West as she considered the market to be adequately supplied.

In addition to the sources’ comments, some OPEC members were openly critical.

UAE Energy Minister Suhail al-Mazrouei at an industry conference in late March called on the IEA to be “more realistic” and not disseminate misleading information.

BASELINE CHANGE

In February, the IEA took the oil market by surprise when it revised its baseline estimate of global demand by nearly 800,000 barrels per day, just under 1% of the world oil market of around 100 million bpd.

The revision, which follows an upward reassessment of demand for petrochemicals in China and Saudi Arabia since 2007, suggests that the oil market is tighter than previously thought, bolstering the argument that OPEC should try to increase production faster, analysts said.

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

The IEA said the disruptions caused by the pandemic had made it harder to get accurate numbers and it had released its revision as soon as information became available.

“The IEA has noted for some time a growing mismatch between observed and implied inventory changes and the revision to our historical estimates of oil demand incorporated in the February report has helped close this gap,” it said. -he declares.

The IEA’s predictions of the sanctions’ impact on Russian production have also drawn criticism from within OPEC as designed to make the case for increased OPEC production, the sources said. .

The IEA 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 to 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 export assessment on statements from a number of companies already announcing that they would reduce or reduce their purchases of Russian oil, but noted increased interest in discounted barrels which could provide a compensation,” the IEA said.

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

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

Saudi Arabia and the United Arab Emirates, which hold most of the spare capacity within OPEC, both said OPEC+ should stay out of politics and at a monthly meeting in late March. , the group reached a modest monthly increase previously expected.

President Biden and his allies felt that much more supply was needed to bring prices down. 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 announced last week that it plans to release 120 million barrels of oil over six months.

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