According to the International Energy Agency, spare oil production capacity will be stretched to the limit as a result of sanctions on Iran and other supply disruptions in places like Venezuela and Libya. David Sheppard reports at the FT:
The Paris-based agency said that while there were signs stronger oil prices may start to weigh on demand growth, for the moment the key risk was supply capacity, with moves by producers to raise output cutting into the thin buffer of reserve production.
“Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit,” the IEA said in its monthly report.
“This vulnerability currently underpins oil prices and seems likely to continue doing so. We see no sign of higher production from elsewhere that might ease fears of market tightness,” it said.
The IEA’s comments come as a host of outages, from Venezuela to Libya, have tightened markets and boosted oil prices as high as $80 a barrel in recent weeks.
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