U.K. Reducing Oil Stockpiles in No-Deal Brexit Won’t Risk Supply
U.K. Reducing Oil Stockpiles in No-Deal Brexit Won’t Risk Supply
(Bloomberg) -- The U.K. will reduce its requirement for emergency oil stockpiles if Britain exits the European Union without a deal but that’s unlikely to cause supply disruptions because its inventories hold about nine months’ worth of its imports, the government said.
“We will be leaving the EU on 31 October whatever the circumstances and we are making all necessary preparations to make sure we are fully ready,” Britain’s Department for Business, Energy and Industrial Strategy, know as BEIS, said in a statement. “International Energy Agency obligations are adopted around the world and are more than sufficient to ensure security of supply.”
The U.K. currently has two international obligations to hold emergency oil stocks that can be released in response to supply disruptions, one with the EU and the other with the IEA. The European directive requires a higher level of oil stocks, enough for at least 61 days of consumption, than the IEA’s mandate for inventories equivalent to 90 days of imports.
The EU directive also requires about one-third of emergency stocks to be held as finished oil products, such as diesel or gasoline. Those stocks can be held anywhere within the EU on the U.K.’s behalf. The U.K. can also hold oil stocks on behalf of other EU countries.
BEIS said the U.K. “will no longer be subject to requirements of the EU Oil Stocking Directive,” after a no-deal Brexit. It added that major disruptions to oil supplies “are extremely rare, with stocks only being released three times since the 1970s, and never close to the level prescribed by the IEA.”
Britain currently holds 272 days’ worth of its oil imports in storage, according to IEA data. Australia, by comparison, holds just 94 days’ worth of net crude import requirements in storage, the agency’s data show.
The global oil market remains well-supplied with the world’s biggest crude producers still struggling to balance supply and demand. The Organization of Petroleum Exporting Countries could be facing an oversupplied oil market again in 2020 with ouput cuts needing to be extended yet again and looming questions over demand growth, according to Bloomberg Intelligence.
To contact the reporter on this story: Helen Robertson in London at hrobertson18@bloomberg.net
To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Helen Robertson
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