War on Commodities: IEA Intervenes by Releasing Oil Reserves

Ever since May 2011, a tactical multi-pronged assault on the commodity markets has been in operation.

From drastically raising of credit margins which started with silver then spread to other commodities, then European regulators have impliedly taken vigil over profits from commodity trade by the banking sector, China has joined the commodity price control fad, UN’s endorsement of price controls (which represents public mind conditioning to justify the cumulative price control actions worldwide), the ban on US OTC trades on precious metals, and the labeling of ‘Conflict Gold’ aimed to control gold flows.

All these appears to be timed with the termination of Quantitative Easing 2.0 this month.

Now comes another direct intervention; the IEA has announced that it will be releasing 2 million barrels a day for the next 30 days

Reports the Marketwatch.com,

The International Energy Agency said Thursday that its 28 member countries have agreed to release 60 million barrels of oil in the coming month because of the ongoing disruption of oil supplies from Libya. The Libyan unrest removed 132 million barrels of light, sweet crude oil from the market by the end of May, according to IEA estimates. As part of the IEA move, the U.S. will release 30 million barrels of oil from the Strategic Petroleum Reserve, which stands at 727 million barrels. This is the third time in the history of the IEA that its members have decided to release stocks. "I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy," said IEA Executive Director Nobuo Tanaka in a statement

I have been saying that this has been part of the implicit communications policy tool called as signaling channel, which is being employed by central banks aimed at managing ‘inflation expectations’.

The goal is to create conditions where statistical inflation has been suppressed (or termed as ‘transitory’).

These actions are currently being backed by claims or studies from the US Federal Reserve and allied institutions that shows that central bank actions have not been related to commodity price increases.

These centrally planned coordinated actions seem designed to rationalize for the next major overt interventions, which will come in the form of asset purchases (currently designated as Quantitative Easing or Credit Easing policies).

Of course, the above pays little heed to the longer term consequence of these series of actions.

Political actions mainly focus on the short term benefits—which are aimed at generating votes and high approval rating for tenure or election reasons. The public hardly sees that these actions concealedly reward or goes in the interests of powerful vested interest groups.