The era of cheap energy is over

faltering emerging economies and the US-China trade dispute.

“A rebound in equity markets would help Brent to rebound from $80,” said Olivier Jakob, analyst at Petromatrix, adding that a dip below $80 on Thursday did not clearly break that level as a source of technical support.

International benchmark Brent crude rose 65¢ to $80.91 a barrel by 1328GMT, having dropped by 3.4 per cent on Thursday. US crude added 79¢ to $71.76.

The IEA slashed its estimate for global oil-demand growth for both 2018 and 2019 by about 110,000 barrels a day to 1.3 million and 1.4 million barrels a day, respectively.

The revision also reflected changes in the way the agency assesses Chinese consumption. Both global demand and supply are close to hitting 100 million barrels a day for the first time.

Fatih Birol, the IEA’s executive director, said in a Bloomberg interview earlier this week that prices are “entering the red zone” that signals danger to consumption, and called on Opec members with spare supplies to increase production.

The latest report showed that Saudi Arabia and other key nations in the Organisation of Petroleum Exporting Countries are already delivering to make up for fellow members — notably Iran and Venezuela — who are suffering losses.

Producers in the so-called Opec+ coalition, which also includes Russia, have added 1.6 million barrels a day since May, the report showed.

As a result, inventories have been replenished and it appears “that the oil market is adequately supplied for now,” the agency said.

Yet the IEA also recognised that the efforts by producers have sharply depleted the amount of spare supply kept aside for disruptions and emergencies, most of which is held by Saudi Arabia.

While the agency estimates that the kingdom could increase by about 12 per cent, it’s unclear how long this would take or how it would be sustained.

The amount available will almost certainly be tested in the coming months as US sanctions take effect on Iran, which has already seen supplies fall to the lowest in more than two years, according to the report.

Iranian exports have slumped about 26 per cent to 1.8 million barrels a day.

“This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” it said. —