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Concerned about an emerging production overhang similar to the
one that led to a price slump in 2014, the Organization of the
Petroleum Exporting Countries is pushing for a supply cut of 1
million to 1.4 million barrels per day (bpd).
The United States restored sanctions targeting Iran's oil sector
in early November, cutting the country's crude exports by close
to 1 million bpd from a summer peak. Although Washington has
pledged eventually to halt all of Iran's global sales of crude
oil, for now it has said eight buyers - China, India, South
Korea, Japan, Italy, Greece, Taiwan and Turkey - can continue
imports without penalty.
"The U.S. decision on the Iranian sanction waivers took some of
the players in the market by surprise," the IEA's Fatih Birol
said in an interview on the sidelines of a conference organized
by Norwegian energy company Equinor <EQNR.OL>.
"As a result, what we see today is that markets are well
supplied and the (oil) price went down by $20," Birol said.
"But the global economy is still going through a very difficult
time and is very fragile and ... we have very thin production
capacity left in the world, in a world which is becoming more
dangerous."
Brent crude <LCOc1> surged above $86 a barrel in October, mainly
on worries about supply tightness due to the Iran sanctions. But
since the waiver announcement, prices have fallen on concerns
about oversupply, as well as a slowdown in global trade. Brent
fetched around $66 a barrel on Tuesday.
"We are entering an unprecedented period of uncertainty in oil
markets," Birol told the conference.
Birol reiterated his call on key producers to exercise "common
sense" at OPEC's policy meeting in December.
Asked whether the oil price could overheat next year, Birol said
it would depend on three factors.
"Despite the weak shape of the global economy, oil demand is
still strong, spare production capacity is very thin and we do
not know what the decision of the key producers in OPEC in
December will be," he said.
(Reporting by Nerijus Adomaitis; Editing by Gwladys Fouche,
Kirsten Donovan and Dale Hudson)
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