Saudi Arabia might have to draw harder than ever before on its spare production capacity as a spiraling economic crisis in Venezuela, renewed US sanctions on Iran and disruptions in Libya strain global markets, the agency predicted.
"This will become an even bigger issue as rising production from Middle East Gulf countries and Russian Federation, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit".
Prospects of USA sanctions on crude exports from Iran, the world's fifth-biggest oil producer, has helped push oil prices up in recent weeks, with both crude contracts trading near 3-1/2-year highs until Wednesday. "This vulnerability now underpins oil prices and seems likely to continue doing so".
"Higher prices are prolonging the fears of consumers everywhere that their economies will be damaged".
China and India, the world's second and third largest oil consumers, could face "major challenges" in finding alternative crude oil following the drop in Iranian and Venezuelan exports, the IEA said.
As supply losses in the Organization of Petroleum Exporting Countries pile up, its biggest producer, Saudi Arabia, is trying to plug the gap.
"Despite higher output in June, OPEC oil supply was down 700,000 barrels per day compared to a year ago, with Venezuela lower by almost 800,000 barrels per day, Angola by 210,000 barrels per day and Libya by 130,000 barrels per day", the IEA said. They can increase investment in US production, raising employment in extraction and raising demand for oil drilling equipment.
Libya's national oil production fell to 527,000 barrels per day from a high of 1.28 million bpd in February following recent oil port closures, the head of the National Oil Corporation said in a statement on Monday. This will bring additional crude to the market.
Analysts noted that renewed sanctions on Iran, which will start by November, could affect 0.5 million barrel per day supplies.
OPEC's rejuvenated bid to tame crude prices could soon exhaust the world's spare capacity cushion, according to the latest monthly report from the International Energy Agency (IEA). Fuel costs have sparked protests in Brazil and Russian Federation, and complaints from India. This could have an impact on global growth and demand.
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