Crude oil prices are affecting demand for the commodity negatively, the International Energy Agency’s head Fatih Birol told S&P Global Platts in an interview.
“The higher oil price environment may, if they stay around this level, also have an impact…put some downward pressure under demand growth,” Birol said. The warning follows the release of IEA’s latest Oil Market Report, in which the authority kept its oil demand growth projections for this year unchanged at 1.4 million bpd.
The agency’s boss noted that Brent over US$70 a barrel is affecting demand the most in the emerging markets that account for the most of demand growth, including China and India, but also the United States.
“So it will not be a surprise if we are to revise our demand numbers in the next edition of the oil market report if the prices remain at these levels,” he told S&P Global Platts.
For those that are watching oil price movements and the reactions of the world’s largest importers, this is not news. After a slump in the fourth quarter of last year, Brent has rebounded by about 40 percent, trading above US$70 at the moment.
Prices were pushed up by the entry into effect of the latest OPEC+ round of production cuts with Saudi Arabia leading the charge and cutting considerably more than it had agreed to, yet again in a bid to raise prices to levels it feels more comfortable with. However, these are levels that India and China do not feel equally comfortable with.
India relies on exports for more than 80 percent of its oil consumption and China is more dependent on imports than it would like to be. So, it is no wonder that the climb in prices “will definitely hurt oil demand if it soared especially in the important demand growth centers such as India,” according to Birol.