OPEC should increase output to make global economy healthier, says IEA chief

OPEC MUST DE CIDE to boost oil output at its next meeting to “comfort” a tightening market, said Fatih Birol executive director, International Energy Agency has said.

Without an increase in output from the Organization of Petroleum Exporting Countries, Birol repeated his warning, as momentum is already slowing amid trade disputes, and that the world still needs more oil to compensate for losses from Iran and Venezuela.

“Global oil markets are going through a very sensitive period -- global economic growth as well,” Birol said in an interview in London last week. “If the oil producers care about the health of the growth of the global economy, which I believe they do, they should take the steps to further comfort the market.”

He agreed that the oil market is well supplied right now, but “the next few months might be difficult if the producers don’t increase production or give the signal for it,” he cautioned.

However, Birol’s warning came in contrast to a statement from 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 slipping back into imbalance.

Khalid Al-Falih, Saudi Arabia’s energy minister said that he is concerned about rising oil inventories and will monitor output levels in producing countries including Iran, Venezuela, Libya and Nigeria.

The IEA had cut forecasts for oil demand growth this year and next because of increasing threats to global economic growth and said that dwindling spare production capacity will keep prices high.

UBS Group, a Swiss bank, in a recent report also said that it sees global oil demand growth slowing to 1.2 million barrels per day in 2019, from 1.5 million barrels per day this year and last year, due to supply-side risks which would remain in focus until mid-2019, potentially pushing spare capacity to a 10-year low.

Birol also expressed his delight with the indications that Saudi Arabia would increase output if needed.

“This provides comfort to the markets which is much appreciated and is the reason that we see markets are more relaxed now,” Birol said. “But this shouldn’t mean that the challenges are over. We still see strong oil demand growth, Venezuela’s production continues to be in free fall and Iranian exports are declining.”

As for Brent crude prices, the prices are almost back to where they started due to high U.S. inventories, rising shale output and a stock market rout, after surging almost 7 percent in September.