Is this the end of cheap oil?
london — The International Energy Agency cut forecasts for oil demand this year and next because of growing threats to global economic growth, yet warned that dwindling spare oil supplies will keep prices high.
Reduced growth estimates from the International Monetary Fund, trade disputes and the strain of high oil prices all fed into the downgrade to consumption, the Paris-based IEA said in its monthly report. Yet as supply losses deepen in Opec members Venezuela and Iran, the level of spare production capacity left elsewhere amounts to just 2 per cent of global demand and will likely shrink further, it said.
“Expensive energy is back” and “it poses a threat to economic growth,” said the IEA, which advises most major economies.
“For many developing countries, higher international prices coincide with currencies depreciating against the US dollar, so the threat of economic damage is more acute.”
Oil climbed to a four-year high above $85 a barrel in London last week on concern that looming US sanctions on Iranian crude exports will leave markets short of supply later this year. Prices have since retreated, as attention switches to the demand threats posed by
[Oil] prices are entering the red zone that signals danger to consumption
Fatih Birol,
Executive director, IEA
A rebound in equity markets would help Brent to rebound from $80
Olivier Jakob,
Analyst at Petromatrix