Producer efforts to prop up crude prices failing – IEA

PARIS (ICIS)–Efforts by crude oil-producing nations in the OPEC+ group are failing to prop up prices, which remain stubbornly in the $60/bbl territory for Brent, in one of the “disparities” the energy sector is experiencing, the executive director at the International Energy Agency (IEA) said on Wednesday.

Fatih Birol highlighted how, despite Saudi-led OPEC, together with Russia, trying to “manage” the markets and crude output, they are failing in moving up crude oil prices.

This is unusual in the history of crude oil, he said, in a way inexplicable given that two major producers have also stopped pumping crude oil into the system.

Iran output has fallen sharply to 300,000 bbl/day following the re-imposition of sanctions by the US, from a peak of 2.8m bbl/day after the nuclear accord allowed the country to return to global markets.

Venezuela’s social, political and economic crisis has also caused its output to fall sharply, currently around 600,000 bbl/day and expected to fall further. At the beginning of 2019, the country’s output stood at 1.2m bbl/day.

“We also have the attacks on Saudi oil facilities or the unrest in Iraq: despite all, prices are still around $60/bbl. This is major disparity when you look at history of crude oil,” said Birol, speaking to reporters in Paris in the presentation of the World Energy Outlook (WEO).

HORMUZ DISRUPTION: WORLD IS READY
Tensions in the Middle East have prompted crude oil players to look at the Strait of Hormuz, where large quantities of crude oil from out from the region to key economies like China or Japan.

Birol said there are “several threats” to the crude oil markets globally, one of them being potential disruption in the key route between Iran and Oman, adding that it would not be wise to “take out of the picture” the risk emanating from that scenario.

However, he added the crude oil reserves globally would be able to cope with the potential disruption.

“What would happen in case of accident or attack there is that there are many countries which could step in [to make for the shortfall] and the IEA is there [to advise on it],” said Birol.

“We have more than enough stocks to address these challenges for weeks and months.”

Click here to see ICIS’ analysis of global oil supply vulnerability.

Picture source: Olaf Kruger/imageBROKER/Shutterstock