IEA should be ‘very careful’ about discouraging key oil investments, OPEC warns
The Organisation of the Petroleum Exporting Countries (OPEC) has slammed the International Energy Agency (IEA), the world’s leading energy authority, for undermining oil and gas investments.
OPEC Secretary General, Haitham al-Ghais,who handed down this warning in a statement on Thursday, said finger-pointing and misrepresenting the actions of OPEC and OPEC+ was “counterproductive,” adding that the influential group of 23 oil-exporting exporting nations was not targeting oil prices, but instead focusing on market fundamentals.
al-Ghais’ was reacting to an interview by IEA Executive Director, Fatih Birol on Wednesday, warning OPEC and its partners to be “very careful” when it comes to policy moves that raise oil prices as this will only “weaken” the global economy. OPEC’s “short term interests vis-a-vis their medium term interests is in contradiction,” Birol told Bloomberg TV. “The global economy is in a very fragile state…. higher oil prices and upward pressure on inflation is the last thing we want to see.”
Birol has been a vocal critic of OPEC+ production policy of late, describing this month’s decision by eight members of the coalition to cut their crude output by a collective 1.16mn b/d from May as a “bad surprise” for the global economy. News of the pending cuts initially triggered a rally in oil prices, with front-month Ice Brent crude futures rising by more than $7/bl to $87/bl by 12 April. But those gains have since been wiped out and Brent is now below where it was before the cuts were announced on 2 April.
Regardless, blaming oil prices for inflation is “erroneous and technically incorrect as there are many other factors causing inflation”, al-Ghais said, adding that “other energy markets have been far more volatile” than oil.
The OPEC chief also took aim at the IEA’s Net Zero by 2050 roadmap, a scenario that envisages no investment in new oil or gas projects and which Saudi oil minister Abdulaziz bin Salman has repeatedly dismissed as “a sequel of the La La Land movie”.
al Ghais reiterated that OPEC and OPEC+ were not targeting oil prices, with the focus being solely on market fundamentals and enabling vital oil industry investments that the world desperately required.
“The IEA knows very well that there are confluences of factors that impact markets. The knock-on effects of COVID-19, monetary policies, stock movements, algorithm trading, commodity trading advisors and SPR releases (coordinated or uncoordinated), geopolitics, among others.
“The finger pointing and misrepresenting OPEC and OPEC+ actions is counterproductive and blaming oil for inflation is erroneous and technically incorrect as there are many other factors causing inflation.
“Other energy markets have been far more volatile with oil markets less so, mainly due to the stabilising role of OPEC and the OPEC+ group,” he said.
The OPEN criticism illustrates a wider breakdown in relations between the oil producers’ group and developed economies, with OPEC’s Gulf Arab members taking a more assertive stance on oil policy.
Saudi Arabia led the expanded OPEC+ group, which includes Russia, in announcing a production cut of 2 per cent of world supply this month.
The move was broadly viewed as designed to boost oil prices, though the price of a barrel of Brent crude, the global benchmark, is now at the same level as when the cut was made.
I’ve been saying for some time if the oil producing nations, mainly OPEC wish to continue their strategy of production cuts to increase revenue they will hasten the transition to electric vehicles.. a short term gain strategy for long term pain.