LONDON (Dow Jones)--The International Energy Agency said Thursday that there are enough oil stockpiles available to ease a rising risk of a major supply shutdown, an assurance that coincided with a large shutdown of oil flows from Canada to the U.S. in the wake of a fatal fire that sent oil prices higher.
In a new report, the agency flagged the rising concentration of oil use in transportation, a rising share of shipments from Russia and Organization of Petroleum Exporting Countries members, and transportation choke points such as the Strait of Hormuz in the Persian Gulf, as lifting the risk of disruption.
The Paris-based body, responsible for monitoring the energy security of the wealthiest industrialized countries, said its 26 oil-importing members boasted oil and product stocks last year that equated to 122 days of demand, the highest level in eight years, though lower than the peak of 156 days seen in 1984.
Stocks last year totaled 4.1 billion barrels, 14% higher than six years previously, and the watchdog said that next year it hoped that 20 of its 28 member countries will boast public stocks, which it defined as government and/or agency stocks, as against commercially held inventories only.
But so intertwined have the energy markets become that any oil supply shock could well have a knock-on effect on natural gas flows and consumption, itself worsening volatility, the agency said in its first public report on its oil supply security plans since 2000.
"Despite growing global concerns about energy security, the IEA emergency response system remains robust and effective," Executive Director Nobuo Tanaka said. Members "constantly review and fine-tune their emergency response mechanisms. Complacency is not an option."
The report highlighted that publicly held emergency reserves constituted a third of all strategic inventories, up from a quarter in the mid-1980s, with a welcome trend being a move toward more refined products within the stockpiles.
Industry holds some 2.6 billion barrels of stocks, though less than half of it is crude oil, a contrast with public stocks, where 83% is crude.
The watchdog coordinates the release of strategic oil reserves held by its members, who are all members of the Organisation for Economic Co-operation and Development.
It authorized the injection of 60 million barrels of crude into the market in 2005 when the devastation from Hurricane Katrina along the U.S. Gulf Coast became apparent.
Price Surges On Enbridge Explosion
Tanaka spoke Thursday just as a fuller picture of events at Canadian pipelines that feed crude oil to the U.S. emerged.
U.S. light, sweet crude oil futures surged around $4 a barrel, or almost 4%, early Thursday as Enbridge Inc. (ENB) said four of its key Canada-U.S. pipelines, with a flow totaling around 1.5 million barrels a day, had been closed following an explosion Wednesday.
"We have enough stocks...to cope with any disruption of oil" Tanaka told reporters, adding that he believed around 1.1 million barrels a day were affected, which he said wasn't that substantial depending on how events on the ground developed.
"If necessary, certainly we will use our emergency measures," he said, though it was premature to judge if they were needed now.
CNBC television in the U.S. reported at around 1200 GMT that two of the four pipelines had reopened, with a capacity to ship 650,000 barrels daily.
At 1210 GMT, U.S., light, sweet crude futures for January delivery traded $2.74, or 3%, higher at $93.36 a barrel.