November 27, 2020

Energy Agency Calls for Rise in World Oil Output

PARIS — Expressing “serious concern” about elevated crude oil prices, the International Energy Agency on Thursday called for an increase in world oil production. It was an unusual move that highlighted consumer countries’ frustration at the failure of oil-producing nations to lift output in the face of rising demand and tighter supply.

Analysts suggested that the agency, which usually does not comment on oil producers’ policies, was signaling a shift in stance to become more confrontational toward the main producers over their failure to increase the flow of oil to world markets.

The call for added production also appears to be a move by the agency, which represents 28 developed economies, to distance itself from the period under its departing chief, Nobuo Tanaka. It was seen by many as too accommodating to Saudi Arabia, and too content to accept the Organization of the Petroleum Exporting Countries’ narrative of blaming speculation, rather than market fundamentals, for high prices.

The agency’s monthly Oil Market Report, respected by industry practitioners, has recently been warning about tightening market conditions as supply has not caught up with strong demand.

After a two-day meeting, the International Energy Agency’s governing board issued a statement expressing “serious concern” at “growing signs that the rise in oil prices since September is affecting the economic recovery by widening global imbalances, reducing household and business income and placing upward pressure on inflation and interest rates.”

As global demand for oil typically increases from May to August, “there is a clear, urgent need for additional supplies on a more competitive basis to be made available to refiners to prevent a further tightening of the market,” it said.

The agency’s board also said it was prepared “to consider using all tools that are at the disposal of I.E.A. member countries.” That was seen by analysts as a veiled warning to OPEC that the agency could, in an extreme case, call for its member countries to agree to release emergency oil stocks if the market situation deteriorated.

“So far there hasn’t been much reaction in the West to the high prices,” said Leo Drollas, chief economist at the Center for Global Energy Studies in London. “It now looks like they are being more assertive.”

Oil prices, which have been climbing since the end of last summer, have risen more sharply this year amid turmoil in North Africa and the Middle East. Light, sweet crude for July delivery was quoted at $98.50 in late trading Thursday in New York, down $1.65 a barrel. It rose to almost $115 in April.

Despite commitments from Saudi Arabia, the biggest OPEC producer, to use its spare capacity to increase output and replace the supplies lost because of the uprising in Libya, the cartel’s production is now running 1.3 million barrels a day below the level seen before the crisis, according to the I.E.A.

Mr. Drollas said that crude output was likely to fall in the second quarter from the first quarter, while reserve stocks had also declined. OPEC oil ministers are scheduled to meet in Vienna on June 8.

Mr. Tanaka will finish his single, four-year term as the I.E.A.’s executive director in August. It is unusual for a chief to serve just one term. He will be succeeded by Maria van der Hoeven, a former Dutch minister of economic affairs.

Under Mr. Tanaka’s watch, there has been an emphasis on close collaboration with Ali al-Naimi, the Saudi oil minister, and an attempt to bolster the Riyadh-based International Energy Forum, which brings together energy ministers from producer and consumer countries.

But that group is seen by many analysts, including Mr. Drollas, as ineffective, especially its flagship project — a database called the Joint Organizations Data Initiative — which lacks critical data from suppliers and large consumers like China.

Article source: http://feeds.nytimes.com/click.phdo?i=e0ce139f8ff4dc527f3bd350bebab507

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