The IEA has a FAQ insisting KSA is coming to the rescue PDQ - well, sorta PDQ.
For a year now we've read mainstream commentators talk about a crunch later this year, the IEA in May put consumption a speck more than 1 million barrels per day more than production. Yeah, that's about what Libya was doing - but - its' been a couple months now and there are no takers for that unmet demand.
That's pretty worrisome.
The IEA FAQ also says they will release additional reserves if needed. I've been digesting this over the weekend and have decided if the IEA releases continue for any length of time - say past Labor Day, it's going to say to me that at least for the time being, KSA is pumping full tilt for all practical purposes and we are at maximum output.
The problem for most people - and my biggest gripe about this action - will be that the market price of oil may not give a good indication that we've hit a ceiling - like it probably doing in '08. It is exactly your point seahorse that the IEA action is distorting the market and that will hide the price signal. Add in the continued slide toward recession limiting demand in the OECD countries and oil might be $80-90/bbl at the time we actually hit the ceiling! Wouldn't that be a kick in the pants?
So if the release continues into fall without significant additional exports from KSA, and the price hasn't increased to the stall level - Brent>$130 (?) or the economy already entered recession, I'm gonna call a TKO on my canary and think about preparing for bunker mode. I'm not sure how low TPTB will allow the SPR to go but once it becomes apparent the jig is up and they stop the releases (I can't see them draining it entirely) - then it will be crunch time.
That's when I'd expect the unexpected to occur..
http://www.iea.org/files/faq.asp