Deep output cuts by OPEC and other oil producing nations will not prevent a huge build up of crude, the head of the IEA said on Friday, urging the world’s richest economies to discuss broader ways to stabilise oil markets.
Fatih Birol, executive director of the International Energy Agency, told Reuters that measures to contain the spread of the coronavirus had lead to an “unprecedented” demand loss that could reach as much as a quarter of global consumption.
Birol spoke to Reuters after speaking to Saudi Arabian Energy Minister Prince Abdulaziz bin Salman ahead of a meeting of OPEC and its allies, known as OPEC+, on Monday to discuss cutting output to reverse the collapse in oil prices. [O/R]
Even with output cuts of 10 million barrels per day (bpd), the equivalent of 10% of global supply, oil inventories would still rise by 15 million barrels a day in the second quarter, Birol said. [O/R]
“This would mean that there will still be huge pressures on global oil markets,” the head of the energy watchdog said.
“Monday’s meeting with OPEC+ countries can well be a good start, but even the numbers people are talking about may not be enough to find a solution to the problem. It would only help to mitigate the damage we are seeing.”
He urged Saudi Arabia, the de facto leader of OPEC and the current head of the Group of 20 major economies, to discuss broader ways to stabilise the global economy’s “meltdown”.
“Saudi Arabia, which has been a stabiliser of oil markets for many years can once again play a constructive role and as chair of the G20 can bring all key economies of the world, producers and consumers together, to have a dialogue to take measures to try to stabilize the oil markets.”
Birol said he was not aware of any measures taken by the U.S. administration to limit the country’s oil output. The drop in oil prices has, nevertheless, led to many fields shutting down there and a reduction in shale drilling, he said.