$40 oil ‘a boost for global economy’

The world economy will effectively receive a $1 trillion stimulus if oil prices stay around $40 a barrel for the rest of this year, the head of the International Energy Agency (IEA) said today.

The IEA’s director Nobuo Tanaka made the claim in an interview with the Reuters news agency.

Lower fuel bills were now supporting an ailing world economy, and Tanaka urged the club of oil exporters, Opec, to be cautious before cutting oil supplies at a meeting on 15 March.

Oil prices have fallen from a record high of nearly $150 a barrel struck last July and have since mid-December traded in a narrow band near $40, caught between slumping demand and the possibility of further Opec output cuts.

“Watch carefully the market and make proper decisions,” Tanaka urged Opec, speaking on the sidelines of a London conference hosted by research group New Energy Finance.

“Mutual interest for producing and consuming countries is economic recovery, so maintaining this kind of stimulus is certainly very helpful,” he said of an estimated $1 trillion boost in lower energy costs.

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