The International Energy Agency, the watchdog organisation for oil-importing nations, called on producers to increase crude supplies and hinted that it could reach into its emergency stockpile.
Importers ask for more oil to keep recovery from reversing
The International Energy Agency (IEA) wants more crude supplies released to prevent a reversal of the global economic recovery.
The call by the IEA, which represents the interests of 28 oil importers, comes three weeks before Opec ministers are scheduled to meet in Vienna to discuss production quotas.
"There is a clear, urgent need for additional supplies on a more competitive basis," the IEA said yesterday. "Additional increases in prices at this stage of the economic cycle risk derailing the global economic recovery."
It is the first time the energy watchdog has called on producers to increase output in such strong terms since 2008, when prices climbed to record highs.
Brent crude, the European benchmark, was trading yesterday at US$112.17 a barrel.
It surged earlier this year to more than $125 on the back of the conflict in Libya and the nuclear accident in Japan.
The IEA sits on a 1.6 billion barrel emergency stockpile, enough to provide the market with about 2 million barrels a day for two years. The last time it reached into those reserves was in 2005, when Hurricane Katrina devastated New Orleans and hit oil supplies.
"We are prepared to consider using all tools that are at the disposal of IEA member countries," the Paris-based organisation said yesterday in a statement issued after a meeting of member countries and the European Commission.
Since a fall in Libyan output sent oil prices climbing, Saudi Arabia and the UAE, which hold the majority of Opec's 4 million barrels per day spare capacity, have released some extra stocks.
But Opec has backed away from raising its production ceiling, which will come under discussion during its meeting in Vienna on June 8. Until yesterday the IEA and Opec's public views on global oil supply and demand had largely been in tandem.
But a steady rise in prices since September is "widening global imbalances, reducing household and business income, and placing upward pressure on inflation and interest rates", the IEA statement said.
"The governing board urges action from producers that will help avoid the negative global economic consequences which a further sharp market tightening could cause, and welcomes commitments to increase supply."
Dr Noe van Hulst, the secretary general of the International Energy Forum, an organisation that promotes producer-consumer dialogue, said the market should focus more on a long-term outlook than day-to-day fluctuations.
"Demand growth and supply growth are balanced. The IEA has even slightly revised downwards demand growth in the most recent oil market review," he said.
"In that sense I don't see where that's coming from. Obviously there is … concern in consuming countries about high price levels but … we are also seeing other kinds of complicated developments."
Dr van Hulst attributed the price volatility to fluctuations in the value of the dollar and the psychological "fear factor" that IEA and Opec officials have cited in the past.