The International Energy Agency made a direct appeal
to OPEC and other major oil producers to boost output, warning that high
prices are inflicting damage on the global economy.
“We
should all see the risky situation, the oil markets are entering the
red zone,” IEA Executive Director Fatih Birol said in an interview on
Tuesday. “Expensive energy is back at a bad time, when the global
economy is losing momentum. We really need more oil.”
Oil
prices rallied to a four-year high above $85 a barrel in London earlier
this month on concern that U.S. sanctions on Iranian crude, along with
chronic supply losses in Venezuela, could lead to a shortage. Traders
are also worried that Saudi Arabia, the biggest member of the
Organization of Petroleum Exporting Countries, isn’t acting quickly
enough -- or may lack the capacity -- to fill any shortfall.
Prices were boosted
further on Tuesday by storm Michael, which shut some oil fields in the
Gulf of Mexico and threatened to hit the Florida panhandle as a major
hurricane. West Texas Intermediate futures advanced 0.6 percent to
$74.71 a barrel on the New York Mercantile exchange at 8:34 a.m. local
time.
Hurting Demand
Emerging
economies, most notably India, are bearing the brunt of the increase in
energy prices, which comes when they’re already contending with
currency depreciation and the fall-out from trade disputes, Birol said.
With the drop in the rupee, Indian consumers are effectively paying as
if oil were $100 a barrel.
“If
there are no major moves from the key producers, the fourth quarter of
this year is very, very challenging,” Birol said. "Demand is still very
strong and we’ve been losing oil from Venezuela in big amounts, and also
Iran is going down."
Venezuela’s
oil production is in “free-fall” as an economic crisis takes its toll
on infrastructure and workers, and could slump below 1 million barrels a
day “very soon,” Birol said. The Paris-based IEA advises most major
economies on energy policy.
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. To fill that gap and cool the price rally, Saudi
Arabia has bolstered production to near record levels, pumping 10.7
million barrels of crude a day.
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