International
US oil supply keeping lid on prices despite global risks: IEA chief
Growth in US oil production has kept prices at “reasonable levels” despite the recent oil tanker attacks near the Strait of Hormuz and other supply risks around the world, International Energy Agency chief Fatih Birol said.
“There is substantial amount of oil coming from the United States, which puts a strong ceiling on oil prices,” Birol said in an interview Friday on the sidelines of the G20 energy ministerial meetings in Karuizawa, Japan.
“Growth from the United States is a welcome addition to oil markets, especially looking at from an oil security point of view and looking at affordability for oil importers, including Japan, Korea and other Asian importers.”
The IEA’s June Oil Market Report forecast non-OPEC supply growth will rise to 2.3 million b/d in 2020, from 1.9 million b/d this year amid a surge in US shale and strong output from Brazil and Norway as new fields start up.
“According to our numbers, in five years’ time, the United States will be the largest exporter in the world,” Birol said.
“This is great news for consumers. Think about the fact we are seeing so many developments in the world: Venezuela, Iran, Libya, Nigeria and many [others]. Still, oil prices are staying at reasonable levels.”
TANKER ATTACKS A WAKE-UP CALL
The alleged attack on two oil tankers near the Strait of Hormuz Thursday was a wake-up call to stakeholders in oil markets, Birol said.
“We are seriously concerned about the recent attacks, and we are monitoring the situation very closely in consultation with our member governments. We are ready to act if and when it is necessary.”
The Front Altair and the Kokuka Courageous were carrying cargoes including naphtha. The incidents followed attacks on May 12 on four tankers near the bunkering port of Fujairah.
“Having lots of supply does not mean that oil security is not important, and this very important incident reminds all of us, all actors in the markets once again, how important an issue oil security is,” Birol said.
The Strait of Hormuz was the most important oil choke point, especially for Asian energy importers, he said.
“Today about 18 million barrels of oil on a daily basis flows through this choke point coming from Saudi Arabia, emirates and other countries to China, Japan, India and other Asian customers.”
“But at the same time it is a major route for LNG, liquefied natural gas. About 30% of LNG goes through this strait, coming again to Japan, South Korea, and other Asian countries.”
Asked whether oil importers will need to seek alternative supplies away from regions so as not to have to transit the Strait of Hormuz, Birol said: “I think this will be a situation observed by oil importers, especially in this part of the world.”
Birol said he did not expect a major shift in oil flows any time soon.
The tanker attacks and heightened supply risks came at a time of concerns about lower global oil demand growth.
Asked which was the biggest risk to the oil market, Birol said the IEA cut its oil demand growth forecast in its June report mainly because of a slowing in the global economy — “not only the advanced economy, but [also] the emerging countries. Chinese economic growth prospects are much lower than previously thought”.
The IEA cut its 2019 oil growth again to 1.2 million b/d, but it sees 2020 growth of 1.4 million b/d on petrochemical demand.
