IEA asks OPEC to increase output

Image: StateImpact Pennsylvania

The International Energy Agency (IEA) has appealed to OPEC to boost output, warning that prices are inflicting damage on the global economy.

Oil prices have rallied to a four-year-high due to U.S. sanctions on Iran and the Venezuelan crisis, even as Saudi Arabia moved slow on filling any shortfall.

IEA executive director Fatih Birol said on Tuesday that oil markets were entering a red zone.

“We should all see the risky situation and try to comfort the markets together, because it may be bad news for the consumers, importers today, but I believe it may well be bad news for the producers tomorrow,” he told Bloomberg.

Birol’s warning follows a 20 percent surge in crude prices since August as OPEC struggles to fill the gap left by tumbling shipments from several members. Iran’s exports have dropped faster than most in the industry expected, with many major buyers halting purchases even before U.S. sanctions are enforced in November.

In Venezuela, output has slumped amid economic collapse. Venezuela’s ‘free-fall’ could drag production below 1 million barrels a day (bpd) “very soon,” he said.

Saudi Arabia, however, is currently pumping about 10.7 million bpd, could pump 11-million a day, according to the IEA.

“Demand is still very strong and we have been losing oil from Venezuela in big amounts, and also Iran is going down. Expensive energy is back at a bad time, when the global economy is losing momentum. We really need more oil.”

On Wednesday (at 11:12 AM, October 10, South Africa) Brent Crude is trading at $84.73, WTI at 74.73 and natural gas at $3.31.