The International Energy Agency (IEA) upped the pressure on the Opec yesterday by hiking its oil demand estimates and warning of the “damaging implications” for the global economy if the oil producers’ cartel does not increase supply.
The IEA latest monthly report show that although Opec crude supply increased by 210,000 barrels per day (bpd) in May, it remains down by 1.25 million bpd because of the Libyan crisis.
With global demand expected to hit 89.3 billion bpd over the year, driven by the energy thirst of China and India, the “call” on Opec oil is set to rise by 400,000 bpd - revealing a “clear need” for Opec to boost supply, according to the IEA.
A phalanx of Opec members led by Saudi Arabia has mooted raising official production levels to help stabilise oil prices inflated by the global economy recovery and the sudden collapse of Libyan supply. But at a meeting in Vienna last week – which was afterwards denounced by the Saudi oil minister, Ali al-Naimi, as “one of the worst meetings we’ve ever had” – an opposing faction including Iran and Venezuala vetoed the plan, sending Brent up by more than $2 in a single day.
The IEA is not entirely gloomy. The Paris-based adviser points to “reassuring signs” that some producers, including Saudi Arabia, intend to boost output in the coming months to make up for lost Libyan oil.
But the reports warns that without such “welcome relief”, the market will tighten still further, “with all the damaging implications that resultant overheating in prices could hold for the global economy”.
Nobua Tanaka, the IEA’s executive director, also reiterated the suggestion that the organisation – which represents 28 oil consuming countries – could use its own 1.5 billion barrel stockpile to help ease any supply constraints.
“We are ready to act at any time if necessary,” Mr Tanaka told a news conference in Russia yesterday.
Similar hints of potential IEA intervention, after last week’s Vienna meeting, received short shrift from Opec secretary general Abdullah al-Badri. “Strategic reserves should be kept for their purpose and not used as a weapon against Opec,” he said.