IEA head: oil market tight, high oil price a threat

The oil market is tightening and high oil prices are already hurting growth in developing economies and threaten any economic recovery in Europe, the head of the International Energy Agency (IEA) said on Wednesday.

Brent crude has averaged over $111 a barrel this year, up from just over $80 in 2010, adding to manufacturing costs and leaving consumers with less disposable income.

“The oil market has been tightening over 2011,” Maria van der Hoeven told Reuters on the sidelines of an energy event in Tokyo. “Stocks have been tightening.”

The IEA said in its monthly report last week that supply and demand fundamentals were underpinning stubbornly high prices.

Despite the threat that fuel costs pose to economic growth, producer group OPEC has given no indication it plans to change output levels at its next meeting in December.

Van der Hoeven declined to say whether she thought OPEC needed to raise output at its oil production meeting.

“I hope OPEC will come to a unanimous decision,” she said. The group’s last meeting collapsed without a deal after bad-tempered talks in which top oil exporter Saudi Arabia and its allies failed to convince other members of the group to boost output.

“Developing countries, especially the poor developing countries, hurt the most, because these oil high prices have a very, very negative effect on their economies,” van der Hoeven said. “In Europe, high oil prices endanger the frail economic recovery.”

Europe is already teetering on the verge of recession due to the sovereign debt crisis, and European Central Bank President Mario Draghi has predicted the 17-nation euro zone will be in a mild recession by the end of the year.

Van der Hoeven’s predecessor Nobuo Tanaka said last month that a price of $70 to $80 was good for both oil producers and consumers, while a sustained Brent crude price above $100 was damaging to the global economy.

GAS, NUCLEAR

It would be unwise for gas producers to come together to form a cartel, van der Hoeven also said.

A loose grouping of top gas producers gathered at a summit on Tuesday hosted by Qatar, the world’s largest exporter of liquefied natural gas (LNG). The group’s meetings typically stoke concern that members will seek tighter coordination on gas supply, but to date members that include Russia, Venezuela and Iran have made no such agreement.

The IEA, which advises major oil-consuming countries on energy policy, expects gas to play an increasingly important role in meeting future global energy needs as demand increases from Asia’s fast-growing economies led by China.

Japan’s Fukushima Daiichi nuclear plant disaster following a magnitude 9.0 quake in March has significantly raised the nation’s oil and gas imports, which had global implications, van der Hoeven said.

If all of Japan’s nuclear plants were shut, the value of oil and gas imports would rise by $3 billion per month in 2012, she said. Additional requirements if nuclear power output were zero, are equivalent to 460,000 barrels per day of oil and 30 billion cubic metres (bcm) of gas in 2012, she added.

“It’s up to Japan what to decide with nuclear,” she said. “But whatever you decide, make clear what the consequences are in costs and in energy supply to the people. That is my message.”

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