IEA: OPEC’s Output Cut May Quicken Re-balance of Oil Market
Iraq seeks same exemption as Nigeria, Iran, Libya
The International Energy Agency (IEA) has predicted that the crude oil market, which is currently oversupplied, will re-balance earlier than expected if the Organisation of Petroleum Exporting Countries (OPEC) implement the decision to cap production when they meet next month.
This is coming as Iraqi, OPEC’s second largest producer has demanded that the war-torn nations should get the same exemptions as Iran, Nigeria and Libya - which have had their crude output hit by unrest and sanctions, stressing that Baghdad should also not participate in the output cut because it is waging a war against Islamic State militants.
Speaking to reporters yesterday on the sidelines of an energy conference in Singapore, the Head of IEA, Fatih Birol however stated that under the current conditions, the Paris-based energy advisor to the industrialised nations expects global output to exceed demand until the second half of 2017.
“But we know that the producers are thinking of intervening in the markets. The OPEC and non-OPEC producers, if they intervene in the markets, this re-balance can be earlier than the second half of 2017,” Birol added.
Last month’s decision by OPEC members to trim oil production has since sent prices surging.
According to agency reports, the OPEC’s deal, which aims to stabilise prices is the first to limit production since 2008 but details will only be determined during the group’s meeting on November 30 in Vienna.
Iran, Saudi Arabia’s bitter geopolitical rival, was exempted from the cuts as it is still ramping up production depleted by years of crippling Western economic sanctions lifted only in January.
Crude oil production has outpaced demand over the past two years.
The resulting supply glut has hammered prices from high of more than $100 a barrel in June 2014 to near 13-year low of $27 in February this year.
Prices are currently hovering above $50 a barrel ahead of next month’s OPEC meeting.
Iraq’s oil minister Jabbar Al-Luaibi has demanded that Baghdad should not participate in the output cut because it is waging a war against Islamic State militants.
Reuters also reported that Iraq told a top OPEC official yesterday that it was ready to cooperate in reaching a deal on supply cuts to support oil prices as long as it kept its output at near current levels.
“We are prepared to cooperate on the correct basis,” Prime Minister Haider al-Abadi said, commenting on the visit by OPEC Secretary General Mohammed Barkindo to Baghdad.