World's oil cushion could be stretched to the limit, IEA warns

Cornelia Mascio
Luglio 12, 2018

The world's oil supply cushion could be stretched to the limit due to prolonged outages, supporting prices and threatening demand growth, the International Energy Agency said on Thursday.

The expected drop in Iranian crude exports this year due to renewed United States sanctions, coupled with a decline in Venezuela's production and outages in Libya, Canada and the North Sea have driven oil prices to their highest since 2014 in recent weeks.

"Rising production from Middle East Gulf countries and Russian Federation, welcome though it is, comes at the expense of the world's spare-capacity cushion, which might be stretched to the limit", the Paris-based IEA said in its monthly report.

"This vulnerability now underpins oil prices and seems likely to continue doing so", the IEA added.

OPEC, Russia and several other producers recently agreed to increase output by 1 million barrels in order to ease oil prices away from 3½-year highs.

"Higher prices are prolonging the fears of consumers everywhere that their economies will be damaged".

"Even so, global oil output was 1.25 million barrels per day higher than a year ago as rampant United States output underpinned healthy non-OPEC growth". Iran has already seen its shipments to Europe fall nearly 50 percent as US penalties deter buyers, and the country's total exports could slump even more, according to the agency, which advises most of the world's major economies.

As supply losses in the Organization of Petroleum Exporting Countries pile up, its biggest producer, Saudi Arabia, is trying to plug the gap.

Iraq, which is also chronically restive, does not have spare capacity either, leaving most of the job of hiking OPEC production to Saudi Arabia, the United Arab Emirates and Kuwait.

The reopening will allow the return of up to 850,000 barrels per day of high quality crude oil to worldwide markets.

World markets remain vulnerable as the Trump administration seeks to choke off Iranian crude exports after the president quit an accord that polices the Islamic Republic's nuclear program. US sanctions look set to cut Iranian shipments by more than 1.2 million barrels a day, the IEA said.

The agency, which oversees the release of emergency oil stockpiles held by importing nations, reiterated that it's monitoring developments in case any action is required.

USA light crude gained 50 cents to $70.88 a barrel, after falling 5 percent the previous session. Fuel costs have sparked protests in Brazil and Russian Federation, and complaints from India.

An escalating U.S. -China trade row also helped depress oil prices as it raised the prospect of faltering global growth and lower energy consumption, particularly in emerging markets.

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