An increase in output should help cushion oil markets seized by tension over a possible conflict in West Asia, the IEA said today, with emerging market nations facing difficulties due to their falling currencies.
The slow pace of the global economy led the International Energy Agency to keep its forecast for oil demand growth for this year unchanged, while rising it slightly in 2014.
However, a dip in supply by 770,000 barrels per day plus concerns a US strike on Syria over its suspected use of chemical weapons triggering a wider conflict sent oil prices up sharply.
The price of Brent crude has since dipped from a peak around $117 hit last month on possibilities of a diplomatic resolution to the standoff.
“But, while the geopolitical storms in West Asia and North Africa have yet to pass, easing fundamentals look set to lessen the pressure somewhat on market participants — at least for the next few months,” said the IEA.
“Global crude supply — notwithstanding the Libyan problems — looks set for an upward jump in 4Q13, thanks to a heady mix of seasonal, cyclical, political and structural factors,” added the energy and oil strategic reserve monitoring arm of the Organisation for Economic Cooperation and Development which groups advanced economies.
The rise in oil prices was also supported by production of Libyan crude, which is a top-rated blend that is highly prized by European refineries, fell from 1 million barrels per day (mbd) in July to just 150,000 in early September due to labour disputes, civil unrest and political discord.
The shortfall was partially made up by Saudi Arabia increasing production to 10.19 mbd in August, its highest level in 32 years.
Excluding the threat of a West Asian conflict the IEA said the outlook for growth of non-OPEC supplies is generous for the remainder of the year, edging up its supply forecast to 55.5 mbd in the fourth quarter.
The call on crude supplies from the OPEC cartel for 2013 was left unchanged at 29.9 mbd.
The IEA cut its oil demand forecast for the fourth quarter of this year by 100,000 barrels per day to 91.7 mbd, but left its overall 2013 figure unchanged at 90.9 mbd.
The forecast for 2014 demand was raised by 100,000 barrels per day to 92.0 mbd in light with the improved global economic outlook.