Roulston Energy Partner Steve Maloney on IEA's Decision to Release 60 Million Barrels of Oil

IEA's decision to release 60 million barrels of oil, ostensibly to offset "Libyan supply disruptions", is a commodity-denominated analgesic to take the sting out of the end of Fed QE2 debt monetization. The US tranche is less than 5% of the Strategic Petroleum Reserve. All in, the supply add is about a day of demand, eadily sopped up by Chinese and Japanese shortages.

Much has been made of the fact the US tapped the SPR under catastrophic conditions: war (the Gulf War) and Katrina. For many investors, the end of QE2 and the market's retreat is just such a catastrophe. So are fallong poll numbers.

But QE2 has been a false friend. We have a weakened dollar, propped up by a weaker euro, and put commodities on the offensive. Political draws of this kind are merely a rear guard action.

The question going forward is to what extent IEA/SPR becomes a second front for QE advocates as the Fed retreats. This equities sugar high can become an addiction if grown-ups fail to step in.




Stephen Maloney is a partner at Azuolas Risk Advisors with over 30 years experience in the US and EU modeling risk and valuation in energy, FX, and other commoditites. His clients include companies, hedge funds, and financial institutions actively marketing or trading physical and financial commodities and derivatives.