Rising oil prices are hurting consumers, Fatih Birol, the Executive Director of the International Energy Agency (IEA), says, calling on major all producers to do the best they can to further boost production and ease persistent supply concerns that pushed Brent Crude to above $86 a barrel on Wednesday.
“Some countries have been making efforts to increase production but this is far from comforting the markets right now,” Birol told the Financial Times on Thursday, adding that his “hope is that all the producers are aware of the sensitive situation and make their best efforts.”
Although higher energy prices may look like a boon for oil exporting countries today, tomorrow the economies of oil exporters will also suffer because of the lower demand growth stemming from high oil prices, Birol told FT.
In an interview with Reuters, also today, Birol said that:
“It is now high time for all the players, especially those key producers and oil exporters, to consider the situation and take the right steps to comfort the market, otherwise I don’t see anybody benefiting.”
Earlier this week, the IEA chief also took to Twitter to comment on the oil price rally in recent weeks and its implications on global economy.
“Rising oil prices are hurting consumers & economic growth prospects today – globally but particularly in the emerging economies – but in a rapidly changing energy world could also have implications for producers tomorrow,” Birol tweeted on Tuesday. Related: A New Era Of LNG Megaprojects
U.S. President Donald Trump has also used Twitter several times this year to slam OPEC for keeping oil prices too high.
Birol’s comments on oil prices and what oil producers should do come just after Saudi Energy Minister Khalid al-Falih said earlier this week that Saudi Arabia would be pumping 10.7 million bpd in October—just below the Kingdom’s highest-ever production level—and would slightly raise production volumes in November.
Russia, the leader of the non-OPEC nations part of the pact with OPEC, increased its oil production in September by 150,000 bpd from August, lifting output to a post-Soviet record high of 11.36 million bpd.
Russia and Saudi Arabia are also said to be in a secret pact to quietly raise production between September and December, keeping the United States in the loop about that plan.
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By Tsvetana Paraskova for Oilprice.com
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For years, the IEA has been in cahoots with the US Energy Information Administration (EIA) in perpetuating a lot of hype about increases in US oil production and rises in US crude oil and gasoline inventories for the sole purpose of depressing oil prices.
If the IEA and its executive director are honest with themselves, they should realize that the global economy could easily tolerate an oil price of $100 a barrel. Such a price is good for the global economy in that it stimulates global oil investments, it also enables oil-producing countries to get a reasonable revenue and thus spending more on exploration and expanding their oil production capacity to meet future demand and it also enables the global oil industry to balance its books and start new projects. The IEA and its executive director should remember the huge damage that the oil price collapse in 2014 inflicted on the global economy.
OPEC and particularly Saudi Arabia and Russia are unable to raise their production significantly beyond the 650,000 barrels a day (b/d) which Saudi Arabia and Russia combined have already added two months ago no matter how loud President Trump shrieks. OPEC’s spare capacity hardly exceeds 1.5 million barrels a day (mbd). That should only be used to ensure stability of the global oil market and not serving Trump’s political interests.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London