The International Energy Agency Friday warned that higher oil prices may threaten the economic recovery next year, rebuffing bulls eyeing three-digit oil prices after a spike close to $90 a barrel.
The International Energy Agency Friday warned that higher oil prices may
threaten the economic recovery next year, rebuffing bulls eyeing three-digit
oil prices after a spike close to $90 a barrel.
The energy watchdog balanced the warning with a boost of its global oil demand
growth forecast by 200,000 barrels a day for this year, hard on the heels of a
similar upgrade by the Organization of Petroleum Exporting Countries.
In its monthly report for November, the IEA said a slowdown of global economic
growth "would not support sustained high prices in 2011."
"'Be careful what you wish for' might be a valuable adage for more bullish
market advocates," said the IEA, which advises the world's most
industrialized countries.
The agency follows the views of the International Monetary Fund--an authority
on macro-economics--, which expects world economic growth to ease from 4.8% in
2010 to 4.2% next year.
The IEA's warning comes after the oil price hit $89.70 a barrel Thursday in
London
and
after some oil producers said high prices wouldn't hurt the economy or should
even rise higher.
Prices have since eased and at 1311 GMT Friday, they were down 1.74%, at $87.29
a barrel, amid heightened expectations that
China
will
raise interest rates.
However, Algeria, Iran and Libya, which are generally seen as hawkish members
of OPEC, have said they would like $100 a barrel going forward to make up for a
weak dollar.
While OPEC's largest producer
Saudi
Arabia
and the organization's
secretary general Abdalla Salem El-Badri have suggested the economy could shrug
off prices at around $90 a barrel.
OPEC officials have maintained they still see the region of $70 to $80 a barrel
as striking the right balance for consumers and producers.
But the IEA said the tolerance to $90 barrel has been interpreted as "the
group's new price aspiration."
This raised "alarm bells in some quarters that a shift in policy...could
threaten the fragile global economic recovery," the IEA said, while
warning of a renewed price bubble.
A Group of 20 summit where leaders of industrial and emerging economies met
Friday will add to the prevailing caution after they delayed until 2011 the
work of defining problems that threaten the global recovery.
Though IEA officials have said in the past that higher oil prices could hit the
economy, the agency's views tended to be more muted until now.
Only Tuesday, the IEA's executive director Nobuo Tanaka in an interview with
Dow Jones Newswires said "we have to wait and see" when asked if an
oil price of $90 or $100 a barrel could hurt the economy.
On a more positive note, the IEA upgraded its forecast for global oil product
demand growth in 2010 by 200,000 barrels a day, making an increase of 2.3
million barrels a day, mostly on higher-than-expected third-quarter demand in
industrialized countries.
The revision comes after OPEC Thursday upgraded by 190,000 barrels a day its
forecast for world oil demand growth in 2010 to 1.3 million barrels a day.
For 2011, the energy watchdog maintained its growth prognosis for oil demand
broadly unchanged at 1.2 million barrels a day. But in absolute terms, it
upgraded its demand forecast for next year by 350,000 barrels a day, to adjust
to the 2010 revision.
The IEA's assessment of OPEC crude oil supply in October differed from the
producers' group. The agency said it fell by 40,000 barrels a day from the
previous month on reduced output from
Iraq
,
Saudi
Arabia
and
Venezuela
. While
OPEC said it had risen by up 140,000 barrels a day on increased production in
Angola
and
Nigeria
.
Oil-industry stocks in the Organization for Economic Co-operation and
Development, which are closely watched as a sign of market glut, plummeted by
42.8 million barrels in September, due to a drop in European crude stocks.
But it said preliminary data indicate they rose in October by 1.8 million
barrels. A build up in crude oil more than offset a draw in gasoline following
a port closure and refinery slowdowns due to industrial action in
France
.
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