IEA warns of five-year oil supply squeeze

GLOBAL oil markets will remain tight over the next five years, the International Energy Agency has warned, in a gloomy assessment that offers little respite for consumers battered by record high oil prices.

The view of the Paris-based energy watchdog, which is funded by the world’s biggest oil consuming nations, helped push oil prices to near record levels. Benchmark crude oil rose US97c a barrel, or 0.7 per cent, to settle at $US140.97 yesterday in New York, a Nymex closing record. US oil futures set a new intraday high of $US143.67 a barrel on Tuesday
The IEA predicted global oil supply capacity would rise to just 96.2 million barrels a day in 2013 from 90.4 million barrels a day this year, including crude production from the Organisation of Petroleum Exporting Countries, OPEC natural gas liquids and non-OPEC production.

Most of that growth would come early before sharply tapering off, the IEA said. Between 2011 and 2013, capacity would grow by less than 1 million barrels a day annually, the IEA said.

The IEA’s outlook resonated with the views of oil company executives at an industry conference in Madrid, who said the red-hot oil market reflected deep-seated pessimism about the industry’s ability to open the spigot to satisfy rising demand.

Christophe de Margerie, head of French energy giant Total, said there was enough oil available, but confidence was lacking that “the system will deliver oil in the future — knowing that to deliver new oil and gas will take eight to 10 years”.

The IEA’s report provides scant comfort for a world desperate for relief from the escalating cost of fuel. The oil shock is already badly denting the global economy, with consumers restricting their travel, truck drivers and fishermen striking in Europe and airlines reducing routes or closing down altogether.

Saudi Arabia tried to cool the markets by adding 200,000 barrels a day of production last month, but prices have continued to climb.

The IEA said it expected crude producers to boost supply in response to a doubling of the oil price since the last medium-term oil market report, issued a year ago. But that has not happened.

The IEA said demand for fuel was still strong in developing countries, and that, combined with supply constraints, “continues to paint a tight market picture”.

Lawrence Eagles, editor of the IEA report, said: “What we are seeing here is an absence of obvious reactions to price signals.”

He noted that it took time for the impact of prices to filter through, especially on the supply side, where “things move much, much more slowly”.

Perhaps one of the most disappointing figures to emerge from the IEA report was its assessment of oil production by nations outside the OPEC cartel. Non-OPEC supply was “paltry to say the least”, said Mr Eagles, the IEA’s head of market analysis, and had been revised down since last year’s market report. He said crude supply from non-OPEC countries would remain at or below 39 million barrels per day over the next five years, though it would rise after 2013.

Australian