IEA asks for hike in oil production

By OGJ editors
-- The International Energy Agency’s governing board issued a statement during its regular quarterly meeting on May 19 appealing to suppliers to provide more oil to the market. IEA said it is prepared to use all tools at its disposal, which include releasing strategic oil reserves.

While the Paris-based agency did not name any particular oil suppliers in the statement, the world’s spare oil production capacity lies within the Organization of Petroleum Exporting Countries.

IEA, considering oil market developments and their impact on the global economy, noted that oil prices stand at elevated levels driven by market fundamentals, geopolitical uncertainty, and future expectations and cited growing signs that the rise in oil prices since September 2010 is affecting economic recovery by widening global imbalances, reducing household and business income, and placing upward pressure on inflation and interest rates.

As global oil demand increases seasonally from May-August, there is a clear, urgent need for additional supplies on a more competitive basis to be made available to refiners to prevent a further tightening of the market, the statement said.

The agency warned that additional increases in prices at this stage of the economic cycle risk derailing the global economic recovery and are in the interest of neither producing nor consuming countries. Especially vulnerable are oil-importing, developing countries.

“The governing board urges action from producers that will help avoid the negative global economic consequences which a further sharp market tightening could cause, and welcomes commitments to increase supply. We stand ready to work with producers as well as nonmember consumers; in this constructive spirit, we are prepared to consider using all tools that are at the disposal of IEA member countries,” IEA said.

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