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Do not see major impact of US-Iran tensions unless oil supply is disrupted: IEA

Our Bureau New Delhi | Updated on January 10, 2020 Published on January 10, 2020

World currently has 1 million barrel per day of surplus oil: Fatih Birol

There is no major impact of the escalated tensions between United States of America and Iran on the price of crude oil unless there is a disruption of supplies according to the International Energy Agency.

“We have seen a major incident in one of the most important oil countries in the world but we have also seen that prices although they rose, have come down again. And this is very peculiar, because when we look at the entire year (from January 2019 to December 2019), prices remain around $ 60 a barrel despite we had the incident,” Fatih Birol, Executive Director of the International Energy Agency said while speaking to reporters at the sidelines of an event to launch a report titled IEA In-depth Review of India’s Energy Policies.

Earlier this month, a US air strike in Iraq killed Iran's most powerful military commander, General Qasem Soleimani. In retaliation, Iran launched missile attacks on a US military base in Iraq. This spooked the crude oil market and Brent crude prices rose close to $ 69 a barrel on Monday (January 6) from $ 66 a barrel on Wednesday (January 1). Brent prices have come down since and were trading closer to $ 65 a barrel on Friday (January 10).

Highlighting how prices have not risen much since despite disturbances, Birol said “We had an attack on the Saudi Aramco oil facilities, despite Iraq oil exports going down from 2.8 million barrels per day at the beginning of 2019 to almost nothing today and Venezuela collapsed as a major oil producer. And price are still there around $ 60 a barrel and we have not seen a major increase.”

“This is mainly because there is abundance of oil production around the world coming from United States of America, Brazil, Canada, Norway, Guyana, there is a huge amount of oil. And looking at the coming year, considering the demand and supply of oil, we see a well supplied oil market and more than 1 million barrels per day of surplus of oil in the market. No reason to worry for the time being,” he added.

Birol said that there is currently 1 million barrels per day of surplus crude oil in the market which is looking for buyers. “I do not see a major impact of US-Iran tensions unless oil supply is disrupted. We expect the United States of America to remain the largest producer of crude oil in the world in 2020-2021,” he said.

In the report reviewing India’s energy policies, Birol said that the domestic demand for crude oil will be increasing because of higher consumption need for mobility, LPG, and petrochemical industry. “India’s current stocks equal to 10 days of imports may need to increase in order to protect India in the rainy days in the oil markets...it is very important especially in this world which is becoming a dangerous world,” he said.

“India’s current strategic reserve capacity of 40 million barrels can cover just over 10 days of current net imports. However, given the expected growth in oil consumption, the same volume may cover only four days of net imports in 2040. Therefore, it is important that the government pursue the second phase of its strategic stock holding policy, which would add an additional 50 million barrels, and also prepares subsequent phases,” the India 2020 Energy policy review report said.

Commenting on the proposal in the report to increase the share of natural gas in India’s energy mix, Minister for Petroleum and Natural Gas, Dharmendra Pradhan said, “We want to emulate the gas economy model of Gujarat where average share of natural gas in the energy mix is 26 per cent, which above the world average of 23 per cent.”

Published on January 10, 2020
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