U.S. President Barack Obama and U.K. Prime Minister David Cameron have agreed to keep open discussions about a possible release of oil held in emergency stockpiles, which have been used in the past to reduce prices or compensate for a supply disruption, a U.K. official familiar with the talks said Thursday.
Mr. Cameron and Mr. Obama discussed the topic during a meeting at the White House Wednesday, but didn't come to any conclusions, the official said. The meeting came as oil prices remain very high and the International Energy Agency warned that sanctions against Iran could remove as much as 1 million barrels a day of oil production from an already tight market.
Western powers will impose the strictest sanctions yet on Iran this summer, to pressure the country over its nuclear program. The European Union has agreed to ban all imports of oil from Iran from July 1, and both the EU and the U.S. will tightly restrict transactions with Iran's central bank, further constricting the country's ability to trade oil.
Japan and South Korea have also said they would seek to reduce their imports of oil from Iran.
The IEA estimated Wednesday in its monthly oil market report that the EU ban, combined with action from other countries and financial sanctions, could remove between 800,000 and 1 million barrels a day of Iranian oil from the market. With gasoline prices already at all-time highs in much of Europe, and becoming a hot issue in the U.S. presidential election, many industry analysts have begun to speculate that consumer nations could release oil from emergency stocks this summer to blunt the affect of sanctions.
U.S. Deputy Energy Secretary Daniel Poneman said Wednesday that the U.S. is constantly monitoring whether a release is necessary from its Strategic Petroleum Reserve.
"The president has been very clear, we have every tool available at our disposal," Mr. Poneman said on the sidelines of the International Energy Forum in Kuwait City. "We are going to keep consulting with our partners globally and the [IEA] to see what tools we need to be using."
The executive director of the IEA, Maria van der Hoeven, said Wednesday that an emergency release isn't imminent.
"There is a tightening market, there is no doubt about that" as oil inventories are below the five-year average, she said. "At this moment there is no need to use [emergency oil stores]."
The IEA can initiate an emergency stock release in as little as 24 hours, according to documents posted on its website. If the agency believes a severe supply disruption is looming, or if such a disruption actually occurs, its executive director consults with senior energy officials from member countries to decide if a stock release is required.
If a release is necessary, all IEA member countries are notified and, if none object, oil stocks can be released onto the market within 15 days.
A South Korean government official said Thursday that the IEA hasn't so far inquired about a possible oil stock release.
IEA rules give member countries the right to unilaterally release their oil stocks, if they see a domestic need for more oil, according to agency documents.
The last IEA emergency stock release was in June 2011, after the Libyan civil war shut down 1.1 million barrels a day of oil exports.
It is far from certain whether sanctions against Iran will result in a disruption of similar scale. Many industry observers, including influential analysts at Goldman Sachs, have argued that Iran will be able to sell oil banned by
the EU to other countries, such as China, resulting in little net loss in global oil supply.