IEA Discussed China, India, Dollar, Capacity in Closed-Door Meeting

LONDON, March 17, 2008 (Dow Jones Newswires)

While Monday's closed-door meeting of the International Energy Agency didn't solve the puzzle of skyrocketing crude-oil prices, it did identify the need for some missing pieces.

The absence of accurate data from energy-thirsty countries such as China and India are complicating demand calculations, some officials attending the meeting concluded.

Officials from the Paris-based agency, the U.S. Commodity Futures Trading Commission and the Organization of Petroleum Exporting Countries were joined by personnel from oil companies, such as Norway's StatoilHydro ASA and France's Total SA, at the long-planned meeting, sources familiar with the event told Dow Jones Newswires.

In a statement posted on its Web site, the IEA confirmed that topics such as the "lack of data transparency" were discussed at the meeting, which also addressed other issues such as the weak dollar and the impact of investment flows.

"There was general concern at the lack of data transparency which exists, both financial and fundamental, and that this hinders the understanding of price formation," the IEA said.

At least two staff from OPEC attended, including Mohammad Alipour-Jeddi, who heads the cartel's Petroleum Market Analysis Department in Vienna.

They met on the day international oil markets underwent a significant reversal in prices, with crude plunging 7%, or $7.50 a barrel, to $104.30 a barrel against $111.80 earlier in the day. Light, sweet crude oil for April delivery settled on Monday $4.53, or $4.1%, lower at $105.68 a barrel on the New York Mercantile Exchange.

It's understood that delegates heard the view from some oil-producing countries that they sought more assurances over demand, with the amount of spare capacity on tap also discussed.

Other topics included the price differences between less-desirable heavier grades of oil and lighter ones, and the future of oil being priced in dollars.

The meeting was planned in November and comes as oil prices have surged in the last two weeks to record levels, defying indications of slowing demand and healthy oil and product stockpiles.

The meeting wouldn't generate policy ideas but was intended to lift the lid on what is going on in the oil market now - insight that may find its way into the work of the agency and others in future, an agency official said Friday.

"The IEA Secretariat will discuss further the themes debated in this roundtable discussion to identify what work the IEA needs to carry out to improve market understanding and data transparency," the IEA said.

A weakening U.S. dollar and investors piling into commodities to protect against inflation have been cited as reasons for the oil price rise, yet many experts agree that oil demand-and-supply fundamentals don't justify current prices, and many have expressed confusion at oil's continued surge.

The problem of cost inflation in the industry was also raised. Some observers believe that rising costs have lifted the floor for oil prices, as producers could be quick to shut in production if prices plunged below the per-barrel cost of increasing production.

"With hindsight, historical price rises were seen as closer to marginal costs than was generally perceived at the time," the IEA said.

LONDON, March 17, 2008 (Dow Jones Newswires)