Crude oil futures were higher during mid-morning trade in Asia Monday after the International Energy Agency forecast prices would remain high “for some time” and a spat between the US and Saudi Arabia added volatility. At 10:35 am Singapore time (0235 GMT), December ICE Brent crude futures were up 93 cents/b (1.16%) from Friday’s settle at $81.36/b, while the NYMEX November light sweet crude contract was up 78 cents/b (1.09%) at $72.12/b.
The IEA in its latest monthly oil market report said Friday that with Brent prices now “established” above $80/b, “expensive energy is back, with oil, gas and coal trading at multi-year highs, and it poses a threat to economic growth.” The world has reached “twin peaks for demand and supply by straining parts of the system to the limit,” the IEA said. “Recent production increases come at the expense of spare capacity, which is already down to only 2% of global demand, with further reductions likely… this strain could be with us for some time and it will likely be accompanied by higher prices,” the IEA said.
The IEA reduced its estimate of global oil demand growth this year and next by 100,000 b/d each to 1.3 million b/d and 1.4 million b/d respectively, citing currency depreciations, trade disputes and revisions to its data on China. “Once again I feel they are underestimating demand and the underlying strength of the global economy. I also think they are overestimating the impact from the trade war fears,” The PRICE Futures Group analyst Phil Flynn said in a note, referring to the IEA’s demand forecast.
Meanwhile, Saudi Arabia has noted “its influential and vital role in the global economy” after US President Donald Trump said the kingdom could face severe consequences following the disappearance and alleged murder of journalist Jamal Khashoggi. The kingdom is facing growing international pressure over Khashoggi’s disappearance, but has so far denied any wrongdoing on the part of the government.