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Report: Oil output fell in April, higher prices loom as economic recovery builds Iraq suspension of crude exports shrank oil output by almost 2 percent, but analysts say gasoline inventories plentiful in the United States and Europe by The Associated Press
Global oil output shrank by almost 2 percent after Iraq suspended crude exports in April, and production slumped to its lowest level in nine years, a respected study said May 13.
Although demand for crude declined as well during the first quarter of the year, a U.S.-led economic recovery would likely boost demand in coming months, the International Energy Agency said. The IEA worries 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. Saudi’s committed to market stability Comments from Saudi Arabian Oil Minister Ali Naimi may have helped reassure energy markets before publication of the IEA’s monthly oil report. Naimi said Saudi Arabia is committed to long-term market stability and to fair prices for crude, the official Saudi Press Agency quoted him May 11 as telling 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. Growth would drive prices 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.
OPEC’s output was unchanged from March, excluding the reduced shipments from Iraq, which belongs to the Organization of Petroleum Exporting Countries but doesn’t participate in its production agreements.
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. Demand might outpace growth 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.
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.
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