More Crude Production is Fine, IEA Says, but Causes of Market Volatility Remain

(Paris) — 11 September 2000

The International Energy Agency welcomes oil producers’ plans to increase production by 800,000 barrels of crude oil per day, promising increased supply in a market that “clearly needs more oil”.

But Robert Priddle, the IEA’s Executive Director, cautioned that the OPEC move was unlikely to stabilise volatile oil markets. “The producers say they have set themselves the objective of achieving stability through unilateral market management,” Mr. Priddle remarked. “So far they have achieved just the reverse.” Prices for crude oil and petroleum products have soared over the past eighteen months after plunging to $10 per barrel in the wake of a previous OPEC decision.

Mr. Priddle pointed to the many uncertainties surrounding the decisions taken Sunday in Vienna by the Organisation of Petroleum Exporting Countries. How much new oil will actually come to market? What further changes can be expected from the OPEC summit later this month? Or from the announced price review in November? Expectations of government intervention unsettle markets – they do not stabilise them – he said.

Mr. Priddle added that deep concerns remain. World stocks of crude oil and product remain low, and imbalances remain across regions and products. Developing countries in particular, many of them with high oil intensities, face sharply increasing import bills.

The best way to protect producers’ and consumers’ interests, the Agency pointed out, is by establishing more open and transparent oil markets which respond swiftly to market signals.

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