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The International Energy Agency (IEA) said on Tuesday the OPEC+ should consider quicker, deeper production cuts to ease the turmoil in oil markets, Kallanish Energy reports.
Executive director Fatih Birol said the initial 9.7 million barrels per day (Mmbpd) production cut in May and June “is a solid start but is insufficient to rebalance the market immediately due to the scale of the drop in demand.”
Last week, he forecast a demand collapse of 29 Mmbpd in this “Black April.”
Birol made three suggestions to help the industry navigate through these choppy waters: Opec+ countries should act as soon as possible and also consider even deeper cuts; financial authorities should consider adopting measures to discourage disorderly market outcomes; and countries with strategic oil reserves should make capacity available to help take surplus barrels off the market.
The comments follow the IEA’s push for G20 countries to take a more proactive approach on production cuts. The Paris-based agency failed to get Norway, UK, Canada and other countries on-board.
It also said last week that up to 200 million barrels of storage could be made available, taking away 2 million barrels per day of supply from the market in the next three months.
Birol had said China, India, South Korea and the U.S. had offered their strategic storage capacity to industry. But he didn’t provide an update on this.
Wood Mackenzie’s research director Sushant Gupta said Tuesday the drop in WTI prices provides an opportunity for large consuming nations in Asia such as China and India to expedite filling up their petroleum reserves.
“The capacity left this time around is much less compared to the 2014/2015 crash. Nevertheless, the current prices are very attractive to fill whatever is left,” he said.
Gupta estimates India has about 12-13 Mmbbls of spare capacity, while the more secretive China, is expected to build reserves up by 300,000 Bpd to reach 1.15 billion barrels this year.
