IEA warns OPEC on oil production

The IEA (International Energy Agency) has warned OPEC, the representative body of oil exporting countries, to step up production in the wake of recent price rises.

The statement comes as the price of crude oil has reached a twelve-month peak at around $77 a barrel. The increasing price of oil has the potential to cripple economies over the world, dependent on fossil fuels for major industry and trade.

It is thought that only an increase in production capacity will help avoid the potentially devastating oil prices over the coming months, given an increase in availability which would naturally lower the price per barrel.

But OPEC, the organization responsible coordinating the production operations of major oil producing nations, has rejected claims that a supply shortage is responsible for the price rises, suggesting that the financial markets and technical refinery issues in the US all play factors in the increasing oil price.

OPEC, which has reduced production twice over the last twelve months, is scheduled to meet in September this year, where capacity will be considered. Despite this it is not yet clear whether the cartel responsible for 40% of global oil production will alter output.

With China’s increasing demand for oil matching their spiraling economic growth, it is thought that $80 per barrel could be a realistic prospect over the coming months without an increase in supply from the OPEC nations. It is estimated that demand for OPEC oil over the next year will increase by around an average of 1 million b/d, to help meet the estimated 6% growth in Chinese demand.

OPEC was created in 1960. Since then the cartel has been responsible for creating and maintaining policy for member countries regarding oil production as a means of providing a stable world oil market, whilst ensuring sufficient supply to fuel the world’s consumption demands.