The International Energy Agency has warned of a summer of worries in global oil and products markets unless the Organization of Petroleum Exporting Countries introduces a substantial output increase shortly. In its closely watched monthly oil-market report, the Organization for Economic Cooperation and Development’s energy-security watchdog raised a serious question over the capacity of refiners and the keenness of OPEC to meet a 1.6 million barrels-a-day jump in oil-product demand in June. The agency also noted that suggestions by OPEC officials that there is no need to boost its production levels ‘appear wide off the mark’.
The IEA has said that it was alarmed that the market might struggle to keep up with rising demand for oil products. It has urged oil cartel OPEC to increase its export ceilings to bridge the potential shortfall. Petrol prices could be set for a significant jump in the coming months, after the world’s important energy expert alerted that fuel prices were expected to rise later this year. The Paris-based IEA also raise alarm that continued unrest in Nigeria, the world’s sixth-biggest crude exporter, would also support the price in the coming months.
Economists and experts have all the reasons to be worried as any further increase in oil prices could push inflation higher in the coming year. The IEA in its report said it expected global oil demand to fall slightly this year, but added that oil and petrol markets could tighten.
The IEA left its 2007 oil demand growth forecast unchanged at 1.8 percent or 1.5 million barrels per day. At the same time it lowered its non-OPEC supply growth forecast for 2007 by 100,000 barrels per day and raised estimated demand for OPEC oil in the third quarter alone by up to 400,000 barrels per day. In the world’s one of the leading exporter of crude oil Nigeria, militant attacks have already closed a quarter of production so far. The IEA anticipated total Nigerian outages had swelled up to 815,000 barrels per day in early May.
The IEA has further noted in its report that since the OPEC was ‘apparently unconvinced of the need to review crude production before its scheduled September meeting, steady output at current levels would lead to the group undershooting our calculated range for a call on it crude, and thus tightening stock further.’
Moreover, oil prices shot up above $62 a barrel Friday after the report from the IEA raised concerns about the market’s ability to meet an expected jump in demand for oil-based products. Soon after the report became public fears that world oil prices could soar to record levels of $80 a barrel this year started to emerge in markets.
