Oil production reaches record peak at 100 million barrels, along with demand: IEA

Representative Image. Photograph:( Reuters )

WION Web Team New Delhi, Delhi, India Oct 12, 2018, 06.57 PM (IST)

As oil prices continue to rise worldwide with India being no exception, the International Energy Agency(IEA) in a report said today that "both global oil demand and supply are now close to new, historically significant peak" at 100 million barrels a day.

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"Production has surged, led by the US shale revolution, and supported by big increases in Brazil, Canada and elsewher," the IEA report said, adding that potential supply could come to the market from places like Iran, Iraq, Libya, Nigeria and Venezuela.

In its study titled “The Future of Petrochemicals”, the world energy body said that the oil market reached the landmark 100 mb/d level with prices rising steadily. 

"For many developing countries, higher international prices coincide with currencies depreciating against the US dollar, so the threat of economic damage is more acute," the report cautioned.

Despite increased oil production, prices have been shooting up worldwide. In India, petrol prices shot up drastically in the last three months as it went above the Rs 80-mark as the Opposition took on the government. The government eventually decided to cut prices by Rs 2.5 but it continued over the Rs 80-mark.

India's finance minister Arun Jaitley categorically rejected going back on deregulation of fuel prices even as critics said the government had imposed too many taxes on petrol and diesel. Petrol prices were freed up by previous Congress government led by Manmohan Singh in 2010.

The price cut reduced the government's excise duty by Rs 1.50 rupees per litre and cut one rupee per litre on the amount charged by state-run oil marketing firms Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp.

After the announcement, shares of oil companies fell more than twenty per cent last week.

The IEA report warned that after the US announced sanctions on Iran, oil prices have shot up. "Even China has seen the first year-on-year production growth in nearly three years in response to higher prices. Meanwhile, output in Iran, Mexico, and Venezuela has fallen, it observed.

Although it welcomed Saudi Arabia's effort towards boosting oil production, but said that supply disruptions in Libya and a collapse in Venezuela should not allow for complacency 

The report pointed out that recent production increases have come at the expense of spare capacity, which is already "down to only 2 per cent of global demand, with further reductions likely to come." 

"This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy," the report concluded.