OPEC must decide to boost oil output at its next meeting to “comfort” a tightening market, the head of the International Energy Agency has said.
“Global oil markets are going through a very sensitive period — global economic growth as well,” IEA Executive Director Fatih Birol said.
“If the oil producers care about the health of the growth of the global economy, which I believe they do, they should take the steps to further comfort the market.”
Without an increase in output from the Organization of Petroleum Exporting Countries, Birol reiterated his warning the global economy will enter “a red zone” because momentum is already slowing amid trade disputes. The world still needs more oil to compensate for losses from Iran and Venezuela, he said.
While the oil market is well supplied right now “the next few months might be difficult if the producers don’t increase production or give the signal for it.”
Birol’s warning came in contrast to a statement from ministers from Saudi Arabia, Russia and other producers. They gave the clearest sign yet that they could return to cutting production, highlighting the need to prepare “options” for how much oil the group should produce next year to prevent the market slipping back into imbalance.
Saudi Arabia’s Energy Minister Khalid Al-Falih said in an interview with state-owned television Al Arabiya that he is concerned about rising oil inventories and will monitor output levels in producing countries including Iran, Venezuela, Libya and Nigeria.
In its latest oil market report the IEA cut forecasts for oil demand growth this year and next because of increasing threats to global economic growth. However it also warned that dwindling spare production capacity will keep prices high.
Swiss bank UBS Group AG said in a recent report that it sees global oil demand growth slowing to 1.2 million barrels a day in 2019, from 1.5 million barrels a day this year and last year. Supply-side risks will remain in focus until mid-2019, potentially pushing spare capacity to a 10-year low, it said.
After surging almost 7 percent in September, Brent crude futures are almost back to where they started due to high U.S. inventories, rising shale output and a stock market rout.
Birol said he was encouraged by indications that Saudi Arabia would increase output if needed.
“This provides comfort to the markets which is much appreciated and is the reason that we see markets are more relaxed now,” Birol said. “But this shouldn’t mean that the challenges are over. We still see strong oil demand growth, Venezuela’s production continues to be in free fall and Iranian exports are declining.”