More on the maybe not-so-dumb Obama-IEA oil dump

That joint agreement by the United States and the International Energy Agency to release crude oil from strategic petroleum reserves? The one that had everybody scratching their head over its timing?

Well, there's more to it. As in, this may have been the equivalent of a pool bank shot, primarily involving Washington, the EU, speaking through the International Energy Agency, ... and the Saudis.

As early as May 11, Mr Obama telephoned King Abdullah of Saudi Arabia to “discuss bilateral issues”, according to the Saudi press agency.

Boom ...

And, this wasn't a spur-of-the-moment thing:

For three months, dozens of senior oil officials from the US, South Korea, Germany and Japan worked secretly to execute what was one of the most daring moves by the International Energy Agency since its creation in 1974.

And, that's about the time we first started bombing Libya, on the usual delusional American belief that we'd topple Gaddhafi in a week or two.

There's one "interesting" part. In a story about how the Commodity Futures Trading Commission is investigating "suspicious" trades in oil just before the decision was announced, it notes the Saudis had already agreed to a production increase.

Maybe the White House thought it would take too long. Or that it would be of too low a quality compared to Libya's vaunted low-sulfur crude.

Or maybe all involved wanted to send a double-slapdown message to ... ohhh ... Iran and Venezuela?

Per the FT article linked at top:

In early May, Mr Obama dispatched a team of senior advisers to the region, including Michael Froman, White House deputy national security adviser, Daniel Poneman, deputy energy secretary, and Neal Wolin, deputy treasury secretary, for talks with Riyadh, Kuwait and Abu Dhabi.

Washington found the Saudis willing to ensure adequate supply.

The IEA nonetheless decided to send a clear message to the market that it was ready to act. On 19 May, at the conclusion of a regular meeting of its board of governors in Paris, the agency said: “We are prepared to consider using all tools that are at the disposal of IEA member countries.”

Venezuela and Iran, along with Algeria, were the three hardliners in the most recent OPEC meeting against raising production.

At the same time, Western nations didn't want to look like this was being done for too narrowly economic reasons, but, after the Saudis couldn't "carry" OPEC with them, decided to act. Japan, Britain and South Korea were other major "movers" on getting the IEA to act.

The primary beneficiary? Most of Libya's oil, of a very high quality, goes to Europe. So, even though the White House started the ball rolling, Europe had good reason to jump in, via the IEA.

The U.S.? Well, analysts as far away as Hong Kong are saying this will be the gateway for more "quantitative easing," but by different name and means. In fact, Forbes calls it QE2.5. If that's the case, and if it actually gets Obama himself, not just Fed Chairman Ben Bernanke, to do something more in the way of stimulus-like action, then that's good.