The International Energy Agency
(IEA), the Paris-based watchdog of industrialised countries including Ireland,
on Friday warned that the Opec oil cartel needs to increase its oil production
in the second half of the year to avoid a tight oil market.
The warning coincides with a rise in Brent crude in London to $78.42 a barrel - close to an all-time high - and the main US benchmark West Texas Intermediate rising to $73.64 on the New York Mercantile Exchange (Nymex).
The Organisation of the Petroleum Exporting Countries has in recent times rejected calls for a rise in production. It says that problems at US refineries, geopolitical instability and speculation on the financial markets, are responsible for the price increase.
The IEA said in its monthly oil market report for July: ?The analysis suggests a sharp rise in the requirement for Opec crude between a second quarter low point of some 30m b/d and nearer 33m b/d by the fourth quarter.?
The IEA says that Opec, which controls about 40 per cent of global oil production, in June pumped about 30.2m barrels per day (b/d).
Opec is correct that part of the price movement relates to speculation. It's reported that speculative bets on higher oil prices ? known as long positions? in the Nymex reached an all time high last week.
The IEA in its report, provides its first estimate for 2008. It says that oil demand growth will accelerate to 2.2m b/d, while non-Opec supply growth would remain lacklustre for the fourth year in a row at 1.0m b/d.
China will be the major force in oil demand for 2008. Chinese oil consumption will increase by 6.1 per cent in 2008. The IEA warned that ?there is a significant upside risk to this [China] prognosis, notably much stronger than expected economic growth.?
The gap between supply and demand would require further Opec production increases. The IEA says that in 2008, Opec needs to produce an average of 32.3m b/d, up from this year?s average of 31.7m b/d.
However, the IEA acknowledges that an increase in Opec total production capacity and refinery flexibility would mean that the market would be in ?slightly more comfortable than 2006 and 2007.?