Robust demand and production uncertainty in some oil-producing countries are expected to tighten the oil markets as we approach the end of the year, Fatih Birol, the Executive Director of the International Energy Agency (IEA), told Reuters on Wednesday.
“Definitely there are some worries that oil markets can tighten towards the end of this year and as major oil importing countries India and other countries need to be ready,” Birol told Reuters after meeting with India’s Oil Minister Dharmendra Pradhan.
The IEA head continues to believe that oil demand growth will continue to be very strong, and coupled with the collapse in Venezuela and what he called the “fragility of production” in countries including such in the Middle East, the oil markets are set for tightening toward the end of this year.
Earlier this month, the IEA said that global oil supply could become “very challenging” when U.S. sanctions on Iran return, but “trade tensions might escalate and lead to slower economic growth, and in turn lower oil demand.” The IEA has not changed its underlying economic and oil demand assumptions, but it is “mindful that demand growth could cool down later this year and into 2019,” the Paris-based agency said.
Outside of war-induced outages, Venezuela is suffering the worst loss of oil production in history amid an unprecedented economic collapse, years of mismanagement and underinvestment in the oil industry, an aggravating humanitarian crisis, and a leader who is hell-bent on clinging to power. Venezuela’s inflation will surge to one million percent by the end of this year as the country with the world’s biggest oil reserves remains stuck in a profound economic and social crisis, the International Monetary Fund (IMF) predicts.
According to OPEC’s secondary sources, Venezuela’s oil production in July dropped to below the 1.3-million-bpd mark—at 1.278 million bpd, production plunged by 47,700 bpd from June. Some analysts expect Venezuela’s production to fall to below 1 million bpd by the end of this year.
U.S. sanctions on Iran’s oil exports are expected to take around 1 million bpd—or possibly even more—off the market in Q4, which would further tighten the oil market if demand growth keeps its pace.
By Tsvetana Paraskova for Oilprice.com
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