Oil prices back near $100 are threatening the global recovery, the International Energy Agency (IEA) said yesterday, raising the pressure on the Opec producers' cartel to increase supply.
But the warning sparked charges of "inconsistency" from Opec, which claims rising prices are the result of "technical" factors such as a pipeline disruption in Alaska, rather than fundamentals of supply and demand.
Last year saw some of the fastest growth rates in decades, the IEA said, with demand rising by 2.7 million barrels per day (mbd) to 88 mbd. In response, the price is rising sharply, with the UK benchmark Brent hitting $99 on Friday for the first time since 2008.
The IEA says the global thirst for oil will grow further to 89.1 mpd in 2011. But prices need to cool to protect the recovery. "Recent price levels already pose a real economic risk – something of deep concern to producers and consumers alike," the agency says.
Opec also revised forecasts upwards this week, estimating demand of87 mbd this year. And the IEA says several members, including Saudi Arabia, have increased supply in recent months, pushing the cartel's total output to 2.3 mbd above its notional target.
But so far the cartel has resisted calls to raise official production levels, which were cut back sharply as the bottom fell out of the world economy in the wake of the Lehmans collapse in 2008. And Opec's secretary general Abdalla Salem el-Badri yesterday responded to the IEA warnings with thinly veiled accusations of scare-mongering. "Supplying the world's media with unrealistic assumptions and forecasts will serve only to confuse matters and create unnecessary fear in the markets," he said. "Ultimately, this is adding to volatility in the oil market."
Mr Badri also accused the agency of inconsistency. "Either they prefer a high oil price, as indicated in their new policies scenarios, which they claim would curb oil consumption, or a lower oil price, which they claim would support economic growth," he said.