Crude oil prices may rise further in 2018, remain above $75 a barrel: IEA

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New Delhi, Aug 31: In what could be the bad news for consuming countries like India, the International Energy Agency (IEA) has said crude oil prices are likely to rise further in 2018 and may remain above $75 a barrel for some time, owing to the geo-political situations across the world — including Iran sanctions and drop in Venezuela production.
Fatih Birol, the Executive Director of the International Energy Agency (IEA), said the world may “unfortunately see a further tightening of markets” towards the end of this year, which will in turn put upward pressure on prices unless the Organization of the Petroleum Exporting Countries (OPEC) go for a significant increase in production. He indicated it is likely to remain over “$75 a barrel” for some time.
This comes at a time when international benchmark Brent crude price was seen at $77.38 a barrel on Thursday inching closer towards $80-mark on signs that Iran sanctions may limit global supply, while the US West Texas Intermediate (WTI) crude was seen at $ 69.84 a barrel at one point.
“I wish I could tell you that we expect a downward trend in the crude oil prices, given the reliance of India and other countries on imports. But the picture we see in fact the opposite. One reason for this is that the oil demand growth this year and next year seems very strong, which is around 1.5 million barrels per day significantly higher than historical averages,” Birol told Business Standard on the sidelines of an energy meet organized by The Energy and Resources Institute (TERI) in New Delhi.
The Indian crude oil basket was seen at $74.75 a barrel on August 30, which is almost 8 per cent higher than the monthly average of $69.22 a barrel in the month of April. Rising prices are a cause of concern for India as the country had budgeted an average crude oil price of $65 a barrel for the current financial year, based on which the import bill was supposed to be around $109 billion, compared to $88 billion in 2017-18.
According to Birol, the drop in production from Venezuela is another important reason for this declining trend in the last two years. “Unfortunately, we expect further decline in Venezuelian oil. In addition to this, several Middle East countries are going through difficult times because of geo-political situations. This is ranging from Iraq, Iran, Libya and also Nigeria,” he said, adding that unless production is increased by OPEC, the world may see further tightening of markets towards the end of this year.
After exports from Iran nose dived to an average of 1.68 million barrels per day (bpd) from August 1-16, compared to 2.32 million barrels a day for July, there were speculations that Iran oil consumers may wind down purchases further. Meanwhile, another report states that during the period under review, demand from India has also declined to 203,938 bpd, compared to 706,452 bpd in July.
According to a report by India Ratings and Research, crude oil prices may increase but remain between $65-70 a barrel for the remainder of 2018-19. “Crude oil supplies from the OPEC have declined due to rising geo-political tensions. Sanctions on Iran, unplanned shutdowns in Libya, along with debt crisis in Venezuela have led to supply constraints. Also, US crude oil production growth has stabilised, there have been draw downs in crude oil inventory stocks and the total exploration capex in the US has slowed down, supporting the upward trend in crude price,” the report said.
On Thursday, diesel prices hit a record high in Delhi at Rs. 69.93 a litre, while that of petrol was seen at Rs 78.30 a litre. Petrol had touched an all-time high of Rs 78.43 in Delhi on May 29 this year.