IEA says Saudi oil output jumps, OPEC critical

The International Energy Agency (IEA) said on Tuesday that OPEC leader Saudi Arabia had stealthily boosted output to cool an oil price rally, while OPEC accused the agency of providing inconsistent oil price views.

Tensions between oil exporter group OPEC and the agency, representing industrialised consumers, have risen as Western countries put pressure on the Saudis and their allies, the only producing nations with spare capacity, to meet unexpectedly robust demand that has driven crude up near USD 100 a barrel. "It appears Saudi Arabia has been making more crude available to the market in the past six months, judging by export data from independent tanker trackers," the IEA, which advises 28 industrialised countries on energy policy, said. Its assessment was starkly at odds with anecdotal evidence from Saudi Arabia's big customers, and with the views of other analysts and consultants captured in a Reuters survey, which showed the Kingdom's output flat last month. While the agency is viewed as the gold standard for assessing global oil market fundamentals, its estimates on OPEC production generally do not carry the same weight. The Paris-based IEA also came under fire from OPEC's secretary general, Abdullah al-Badri, who produced an unusually harsh statement criticising it for inconsistency in being willing to add to oil prices by imposing taxes, then asking OPEC to curb prices to safeguard the world economy. "In 2009 when the oil price was lower, the IEA had advised its members that they needed to increase petroleum taxes." "So why today, when they are complaining that oil prices are too high, are they not advising their members to reduce taxes?" OPEC says it believes the market is well supplied, but some analysts say street protests near OPEC members' borders in countries such as Tunisia, partly sparked by high food and fuel prices, may encourage the group to act soon to raise output. "OPEC is likely concerned that the instability could spread to other North African (Algeria, Libya, Egypt) and Middle Eastern (Jordan, Yemen) countries suffering similar internal problems," said David Wech from JBC Energy in a note. "Some OPEC members might start to question the hawkishness on oil prices illustrated over recent months," he added. Buyers doubt OPEC pumping more The IEA said it had found out that the Organization of the Petroleum Exporting Countries had already raised production, in contrast with previous surveys of output by the producing group, including by Reuters. "In December, Saudi output was assessed at 8.6 million bpd, up 100,000 bpd from a revised November estimate of 8.5 million bpd," it said adding that Iraq, Kuwait and the UAE, together with the Saudis, had reduced official selling prices to make sales "more attractive." By contrast, Reuters' OPEC surveys have shown Saudi production at around 8.25 million barrels per day in the past months and OPEC's own estimates have put Saudi output at 8.3 million. The differences of 300,000 bpd is enough to cover nearly a fifth of the world's estimated incremental demand in 2011, which is expected to slow to a half of last year's heady pace. Traders said they had doubts the Saudis were pumping more. "We have not seen the evidence; we think its (Saudi) output has been steady," said one of the country's major crude buyers. Core OPEC members led by Saudi Arabia do not want runaway high oil prices but need at least $80 a barrel to guarantee their budget needs and therefore analysts say the organisation is reluctant to openly agree output increases for fear of a sharp drop. US oil futures eased by USD 1 at one point on Tuesday but pared losses to 16 cents when it settled at USD 91.38 a barrel. Consumer countries founded the IEA in 1973-1974 as a counterweight to OPEC after the Arab oil embargo, which sent prices soaring. The two sides have a working relationship, although they have clashed this year over the oil price and need for extra supplies to help the fragile global economic recovery. Analysts from Bernstein said the market was well balanced in 2011 and prices would hover around USD 90 a barrel. "In later years, however, we believe that constrained non-OPEC supply and an improving outlook for economic growth, pointing to increased demand growth, will support crude prices and forecast USD 130 per barrel by 2015," Bernstein said in a note. OPEC on Tuesday blamed the current oil rally on speculation and a weak US dollar. "Oil prices have recently been driven by technical matters such as events in Alaska and the North Sea. Also the weak dollar and speculation have added to this, pushing oil prices higher, especially Brent," it said. The IEA raised its oil demand growth forecast by 80,000 bpd to 1.41 million bpd. The IEA said spare capacity within OPEC has fallen below 5 million bpd for the first time in two years. OPEC has kept its official output policy unchanged since agreeing to a record cut in its production in December 2008. Both OPEC and the IEA raised their demand forecasts this week. The IEA said OPEC needs to pump 400,000 bpd more than expected this year to balance the market, while OPEC said it would need to pump an extra 160,000 bpd.