IEA Warns of Price Risk for OPEC as Venezuela Oil Crisis Looms

  • Costlier crude could weaken global demand, spur rivals’ output
  • Venezuela’s collapsing oil industry ‘very bad news’ for market

By Grant Smith and Francine Lacqua

(Bloomberg) —

Oil prices are near levels that could prove harmful to OPEC and other producers as global markets tighten and a “major” supply crisis looms in Venezuela, the head of the International Energy Agency said.

“One should be careful — the established producers — what one is wishing for,” IEA Executive Director Fatih Birol said in a Bloomberg television interview from Berlin. The warning from the Paris-based agency, which advises most major economies on energy policy, follows oil’s ascent to a three-year high as production cuts and soaring consumption whittle away a global surplus.

International Energy Agency Executive Director Fatih Birol discusses the outlook for oil amid geopolitical risks.

“If prices increase significantly higher than what we have now, it may have some consequences which may not be desired by the established oil producers, such as weakening of global oil-demand growth,” Birol said. It could also spur output from U.S. shale, Mexico”s deep waters, Brazil and elsewhere, he said.

Oil prices are being bolstered by escalating political tensions in the Middle East and by deepening supply losses in OPEC member Venezuela, where the economy continues to deteriorate.

“We see a major risk of a supply crisis in Venezuela, which has been a major oil exporter,” Birol said. “A country which has huge reserves is importing oil today, which is very, very bad news for the oil market, but especially for the citizens of Venezuela.”

–With assistance from Tom Keene.

To contact the reporters on this story:
Grant Smith in London at gsmith52@bloomberg.net;
Francine Lacqua in London at flacqua@bloomberg.net

To contact the editors responsible for this story:
James Herron at jherron9@bloomberg.net
Amanda Jordan, Rakteem Katakey