Trade disputes fuelling global oil demand, says IEA

International Energy Agency (IEA) has said that trade disputes, which are currently affecting big oil exporters, have further stimulated global demand for oil.

This development, it noted, is making increased supply of the commodity expedient.It urged the Organisation of Petroleum Exporting Countries (OPEC) to boost oil output at its next meeting to “comfort” a tightening market.

Executive director, IEA, Fatih Birol, said yesterday: “Global oil markets are going through a very sensitive period; global economic growth as well. If the oil producers care about the health of the the global economy, which I believe they do, they should take the steps to further comfort the market.”

Without an increase in output from OPEC, Birol warned that the global economy would enter “a red zone” because momentum was 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 now, “the next few months might be difficult if the producers don’t increase production or give the signal for it,” he added.

Birol’s warning contrasts with statements of 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 from slipping back into imbalance.

The IEA also said that the world’s biggest oil and gas producers were under unprecedented pressure to cut their reliance on energy revenues, as advances in fuel efficiencies and electric vehicles threaten to undercut demand and erode their finances.

Bloomberg quoted Saudi Arabia’s energy minister, Khalid Al-Falih, to have said in an interview with state-owned television, Al Arabiya, that he was 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 would 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.