Rising OPEC production and comfortable oil stocks in developed nations should limit a further spike in oil prices
Rising OPEC production and comfortable oil stocks in developed nations should limit a further spike in oil prices despite demand hitting an all-time high later this year, the West's energy watchdog said on Thursday.
The International Energy Agency, which advises 28 industrialised countries on energy policy, said in its monthly report OPEC's output rose by 280,000 barrels per day (bpd) to a two-year high of 29.85 million bpd in January from December mainly thanks to higher Iraqi output.
"We are seeing a little more oil from OPEC as they're seeing the same indicators on the demand side, especially in Asia, that we are. A flexible attitude from OPEC is a good thing," said David Fyfe, head of the IEA's oil industry and markets division, in an interview with Reuters Insider television.
"The fact that prices have gone up from around $75 in September to $95 a barrel and above is because of a sharp tightening in the physical market," he said.
"It's not the only thing driving prices but some of the impetus comes from that market tightening. We saw very strong 2010 oil demand growth and we're feeding that through into 2011, he said.
The IEA said it raised slightly its 2011 oil demand growth forecast by 50,000 bpd to 1.46 million bpd.
Although growth would be nearly half of the unexpectedly strong growth in 2010, the world oil demand will surpass 90 million barrels per day in late 2011 for the first time.
The IEA said OECD oil stocks fell to a two-year low equal to 57.5 days of demand in December from 58.3 days in November but were still comfortable.
"A cushion of stocks and spare capacity does provide some potential to constrain further price increases in 2011," it said.
The IEA was founded in 1973-1974 as a counterweight to OPEC after the Arab oil embargo, which sent prices soaring.
Tensions between oil exporter group OPEC and the agency have risen as Western countries put pressure on the Saudis and their allies, the only producing nations with spare capacity, to meet robust demand that has driven crude above $100 a barrel.
Last month, the IEA said OPEC leader Saudi Arabia had stealthily boosted output to cool an oil price rally.
OPEC's secretary general Abdullah Al Badri told Reuters Saudi Arabia had told OPEC it had not opened its taps.
Tensions have eased since then and the IEA has said it sees no emergency despite prices exceeding $100 a barrel as global oil stocks and OPEC's spare capacity serve as a cushion.
On Thursday, the IEA said Saudi oil output was flat in January at 8.6 million bpd with Angola, Libya, the UAE and Venezuela slightly raising production and Iran and Nigeria cutting output.
"Non-OPEC supply was unchanged from December at 53 million bpd as outages continued to constrain production," the IEA said.
Industry sources told Reuters Saudi Arabia would keep crude oil flows steady to Asian buyers in March. It was yet unclear if shipments would be steady to buyers in Europe and the United States.