The International Energy Agency has (IEA) not seen much recovery in actual oil demand in OECD countries and the pace of global recovery may not justify OPEC raising output at its next meeting, the agency’s executive director said today.
Nabuo Tanaka said distillates stocks in countries of the Organisation for Economic Cooperation and Development (OECD) were very high and this underscored the weak pace of recovery in those countries, since diesel is a key indicator of economic and industrial activity.
“We are concerned that economic recovery expectations are very high. While that is true in China and India, in OECD countries like Europe and Japan, we have not seen much of an actual recovery in oil demand,” Tanaka told Reuters on the sidelines of an energy conference in the city-state.
“OECD inventories are also very high, OPEC’s concerns are the global economic recovery, so if the economies recover in a robust manner, they have to produce more,” he said.
“If not, just simply adding to the stock level does not make any sense.”
The Organization of the Petroleum Exporting Countries will meet in Luanda, Angola on December 22 to decide on its oil production policy, with most members saying so far that it was too early to decide on any changes as stocks are high, even though prices have risen to around $80 a barrel.
The producer group has kept official output targets unchanged at meetings this year, after it agreed to curb output by 4.2 million barrels per day (bpd) last year.
Oil has risen to $78.60 today from a low of less than $33 in December, though it is still about 47 % below a high of more than $147 hit in July last year. One reason for oil’s climb is the soft US dollar, which today held near 15-month lows against a currency basket.
Tanaka said the weakening dollar was “certainly one element of higher oil prices”.
When asked if oil should be priced off a basket of currencies or even the euro instead of the dollar, to provide more stability, Tanaka said:
“The most reliable and liquid currency is also still the greenback. Moving away from the dollar may not necessarily be the final solution.”