IEA says oil output fell in April, higher prices loom
LONDON (AP) – Global oil output shrank by almost 2 percent after Iraq suspended crude exports in April, and OPEC’s production slumped to its lowest level in nine years, an agency that monitors the energy market said Monday. Although demand for crude declined during the first quarter, a U.S.-led economic recovery would likely boost demand in coming months, the International Energy Agency said. The IEA expressed concern that oil producing countries might hold back from pumping additional crude and that prices would surge as a result.
“The IEA is clearly spelling out that consuming countries need more oil,” said Lawrence Eagles, head of commodity research at London brokerage GNI Ltd.
Still, analysts say inventories of gasoline are plentiful in the United States and Europe, so motorists might not feel much of a sting at the pump when they head for the highways this summer.
Prices were mixed in trading Monday. Contracts of light, sweet crude for June delivery rose 6 cents to $28.05 a barrel on the New York Mercantile Exchange. In London, June contracts of North Sea Brent crude fell 18 cents to $26.20 a barrel on the International Petroleum Exchange. Over the weekend, Saudi Arabian oil minister Ali Naimi said Saudi Arabia is committed to long-term market stability and to fair prices for crude. The official Saudi Press Agency quoted him Saturday as making those remarks at an energy conference in Cairo, Egypt. In its report, the IEA said that demand for oil among the richest consuming countries plunged in March to its lowest level in 12 years. The IEA is the energy watchdog for the Organization for Economic Cooperation and Development, a group of rich oil-importing nations. However, the Paris-based agency forecast that demand would pick up later in the year.
, especially if the United States staged a strong recovery.
“If the world economy starts to improve, you’ll certainly see prices increase quite sharply,” said Eagles of GNI. U.S. crude prices of $30 a barrel were “highly likely” in such a scenario, unless OPEC anticipates such a tightening of supply and decides to pump more oil when its oil ministers meet next month in Vienna, Austria.
World crude supplies fell in April by 1.4 million barrels a day to 74.5 million barrels a day. Supplies were pinched, the IEA said, because Iraq suspended its exports as a protest against Israel’s military offensive in the West Bank. However, Iraq’s April 8 boycott lasted just 30 days, and Iraqi crude is now back in the market.
Production by the Organization of Petroleum Exporting Countries with Iraq included was its lowest level in April since June 1993 when Iraqi and Kuwaiti supplies were lost as a result of the Gulf War, the IEA said.
The IEA forecast that daily global demand for oil would grow from 75.3 million barrels in the second quarter to 77.8 million barrels in the fourth quarter.
Analysts underscored the IEA’s concern that demand might outpace the growth in supply.
The agency’s “worst fear” would be for oil markets to tighten up much more” said Jan Stuart, head of research in global energy futures at ABN AMRO bank in New York.
However, Stuart argued that costlier crude would probably have a modest impact on retail prices for gasoline.
Pump prices are stable and even falling, as refineries are busy stocking up on crude from which to process gasoline for the peak summer driving season. U.S. gas prices dipped by an average of one-third of a cent per gallon over the two weeks ending May 3, according to the Lundberg Survey of 8,000 gas stations nationwide.
Gasoline inventories are ample, and U.S. and European refiners Europe have adequate surplus production capacity, Stuart said.
“There’s plenty of the stuff around,” he added.