Major oil producers like Saudi Arabia and Russia need to sustain strong production levels in order to offset supply risks, the International Energy Agency’s executive director Fatih Birol said Tuesday, warning that the oil market is “not out of the woods yet.” Birol sounded a cautionary note about the near-term risks in an interview with S&P Global Platts at Africa Oil Week in Cape Town, noting that Venezuelan production is in “free-fall” and could drop below 1 million b/d soon. He also mentioned that with Iranian exports in decline because of US sanctions and concerns over Angola, Nigeria and Libya, potential supply shocks remain a real threat, especially with “demand still strong.”
“After our call to key producers asking for common sense we see very good responses led by Saudi Arabia, UAE, Kuwait, Iraq and Russia,” Birol said. In addition to that you see the significant growth out of the US taking prices down to $73/barrel which I believe is much more reasonable.” He was keen to point out that despite these risks, the oil market is in a much better place than a month ago when prices spiked above $80/b. Saudi Arabia has increased crude production to around 10.7 million b/d recently, close to all-time record highs, while other key OPEC members have raised output and Russia is also producing near all-time highs at almost 11.5 million b/d.
Birol also said that despite the exemptions given by the US to eight importers of Iranian oil being temporary, they could “provide a comforting factor to the market.” The US imposed sanctions on Iranian oil exports this week but temporary waivers were granted until May to China, India, Japan, South Korea, Italy, Taiwan, Greece and Turkey.