London: Fears about global oil supplies have receded after producers pumped more, according to the International Energy Agency, which had warned of a potential shortage a month ago.
“Concerns about the stability of oil supply have cooled down somewhat, at least for now,” the Paris-based agency — which advises most of the world’s major economies — said in a monthly report. “We have seen increases in production, mainly in Saudi Arabia and Russia, a surge in US exports in June and a partial, but fragile recovery in Libya,” it said.
The more relaxed outlook comes despite an increase in the agency’s oil demand estimates. The also said the calm might prove fleeting, echoing its warning from last month that ongoing losses in Venezuela and fresh US sanctions against Iran could eventually cut more supply than other producers can replace.
Oil prices have fallen for six straight weeks in New York, trading below $67 (Dh247) a barrel on Friday, amid concern that the trade dispute between the US and China could hurt economic activity and energy consumption. Prices also retreated as Opec and Russia agreed to revive output to ease consumer concerns, after crude surged to a three-year high earlier in the summer.
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World oil supplies increased last month because of gains in Russia and Gulf Opec members Kuwait and UAE, the IEA said. Output from the Organisation of Petroleum Exporting Countries (Opec) and its partners was back in line with the target agreed back in 2016, fulfilling the group’s June agreement to end a long period in which cuts were deeper than pledged.
Production from Opec itself was steady in July after an unexpected pullback by its biggest member, Saudi Arabia. After signalling the potential for record output in July, it actually pumped 10.35 million barrels a day, slightly less than June due to subdued interest from Asian buyers, the IEA said.
In order to satisfy demand in the second half of this year, the cartel will have to increase production slightly from the 32.2 million barrels a day it pumped in July, the IEA’s data showed.
Any increase would come on top of the additional supply needed to offset ongoing losses in Venezuela and a looming slump in Iran, which faces renewed American sanctions after US President Donald Trump quit a nuclear agreement with the country.
“As oil sanctions against Iran take effect, perhaps in combination with production problems elsewhere, maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion,” the IEA said.
Pressure on world markets has also eased with a pullback in demand growth, which “slowed dramatically” in the second and third quarters but is set to rebound after that. The agency boosted its estimate for the consumption increase in 2019 by 110,000 barrels a day to 1.5 million a day, predicting consumers will respond to lower prices.