The world will have to rely on Opec for any increase in oil supply this year because producer countries outside the group will fail to increase output, the developed world’s energy watchdog concluded on Friday.
The International Energy Agency’s revised forecast comes as Opec ministers begin to arrive in Vienna for a policy meeting on Sunday.
The group, which produces more than a third of the world’s crude oil, has been sending mixed signals about whether it intends to further reduce its output in the hope of boosting oil prices, which have fallen by about $100 since reaching a high of $147 a barrel last July.
This could be the first year since the oil price collapse of 1998 that non-Opec oil producers will be unable to increase production even if they escape interruptions from hurricanes that can temporarily knock out large volumes of oil being produced in the Gulf of Mexico.
The IEA revised non-Opec supply projections down by 380,000 barrels a day to 50.6m b/d, eliminating all previous expectations of growth. The forecast reflects the view that operational problems in Azerbaijan are worse than thought.
The IEA’s pessimism about 2009 was not limited to Azerbaijan, however. “Given the current environment of both falling oil demand and constrained credit, more instances of project slippage are likely as investment is curbed,” the report stated.
This will make more perilous Opec’s task of avoiding output cuts that are too deep. If the group cuts too much supply from the market and inventories drain quickly forcing prices to jump, it could inadvertently suffocate any recovery in the world’s struggling economies.
Opec countries’ compliance with the organisation’s policy of cutting 4.2m barrels a day of its crude oil production since September was 80 per cent in February, the IEA said. But among the member countries compliance ranged anywhere from Ecuador’s 31 per cent to 108 per cent for Saudi Arabia.
On Sunday Opec is likely to choose either to engage in a further round of cuts, or to stress that members need to comply fully with existing ones.
Opec’s monthly oil market report on Friday hinted strongly that its members needed to take a tough line whatever decision they made.
The cartel’s analysts said the world economy was in a “dreadful situation” and that financial and macroeconomic indicators in the first quarter continued to paint “a very gloomy outlook across the globe”.
They added: “With continued economic deterioration and demand erosion as well as the impending low demand season, there is likelihood of renewed [downward] pressure on prices.”
The IEA said Opec would reach its goal of significantly draining oil stockpiles if it complied fully with existing cuts from April to the end of the year.