India, China to drive global oil demand in years to come: IEA

Main worry is oil prices are likely to go even higher, Fatih Birol, ED, International Energy Agency, tells ET Now. It will be great if we see production increase coming 65612202 65597378 65620319 from the OPEC alliance countries, says BirolEdited excerpts: Supply chain issues seem to be hitting hard leading to a big spike in crude prices. What is your own analysis? I am not happy that my expectation that crude prices would go up, are turning out to be true because the higher prices we are experiencing today at about $77 are neither good news for the global economy, nor good news for the oil importing nations like India. But my worry is that there are many reasons why we may well see prices going up even higher. First, we expect strong oil demand growth by this year and next, to about 1.5 million barrels per day. This is very strong compared to historical averages. But on the supply side, we are seeing that there are serious challenges. Number one and the most important one is Venezuela is a major oil supplier. Venezuelan oil production in two years’ time has halved from more than 2 million barrels per day to today around 1 million barrels per day. We may see further decline in Venezuelan oil production. Secondly, in many countries in Middle East there are serious geopolitical as well as domestic problems which may hamper their export and production capacities and this is definitely not good news in addition to Venezuela on the supply side. To sum up, strong oil demand growth, serious constraint on the important suppliers’ side may well mean a further tightening of oil markets towards the end of this year. This in turn may well mean that there can be upward pressure on the oil prices. How prolonged could this rally in crude be? In the next six months or so, Venezuela suddenly and completely reversed would be rather an optimistic expectation. But later on we may well see oil coming from other countries. Even in the current period of time, it will be great if we see production increase coming from the OPEC alliance countries. This will be something which would be good news for countries like India, China and other major oil importing counties and for their economic stability. What is the thinking at the OPEC level? What production levels would they see the output at and also, is there any angle with the Saudi Aramco IPO being delayed? It is very difficult for me to know the thinking in OPEC countries. But what I would like to see is the head of the international agency talking with many governments around the world, as I had a wonderful, fruitful discussion with minister Dharmendra Pradhan here. I would like to see that the production from the OPEC countries increase especially in the next few quarters and comfort the markets, not putting further pressure on the prices. When it comes to the Saudi IPO question, this has to be discussed with the Saudi authorities but I am very much supportive of the Saudi Arabia pulling up its economy and diversifying its economic efforts. In fact, very soon, we will be coming out with a major report about the need of major oil producing countries to diversify these economies slowly but surely in order to address some of the challenges that their economies are facing today and could face more seriously in years to come. What are the key monitorables from now on? What should crude oil watchers keep an eye out for? In the oil markets, we have look very carefully at how oil demand is moving and if it moveing as strong as we expect it to. This is the pressure factor. Second, if the decline in Venezuela output somehow slows down, that will be good news. Venezuela is something to watch out for and also the geopolitical developments in key Middle East and North African countries like Iran, Lybia and Iraq. I wish to see Saudi Arabia and its allies increasing production. I will be watching it closely and I hope to see more oil, more volumes to come from Saudi Arabia to comfort the markets and to put downward pressure on the price increase. How do you see consumption trends at the end of large consumers like India and China panning out? When we look at IEA numbers, we see that the two major drivers of oil demand growth are China and India. This is driven by the mobility, by cars, trucks but more and more by the petrochemical industry which is a major user of oil. On top of that, in both of these emerging giants, aviation jets are playing an increasingly bigger role in the higher oil demand. We are sure that India and China with their increasing economic activity, with the strong population growth prospects and greater emphasis on petrochemicals will continue to drive global oil demand growth in the years to come.

from The Economic Times https://ift.tt/2C2F47L