Oil prices remaining around $65 per barrel is “good for the global economy,” Executive Director of the International Energy Agency (IEA) Fatih Birol told Al Arabiya on the sidelines of the 2020 World Economic Forum in Davos, Switzerland.
Birol noted, however, that he was concerned about Iraq, the second largest oil producer in the Organization of Petroleum Exporting Countries (OPEC).
“[Iraq’s] production today is about five million barrels per day … Iraq’s political stability is very important for the oil markets and beyond that for the global economy,” he said.
Iraq has been unstable for years, but the situation deteriorated rapidly in January following the assassination of top Iranian military commander Qassem Soleimani. Anti-regime protests have taken root in the country, with authorities cracking down violently. More than 460 protestors have died since rallies first began in October last year.
On the subject of the oil production cut agreement between OPEC and its allies led by Russia, Birol believes that despite commitments to deepen cuts to 1.7 million barrels per day (bpd), there will still be “at least one million barrels per day surplus capacity in the market” in the first half of 2020.
“I do not expect the prices to jump in the absence of any geopolitical surprises,” he added.
OPEC and its allies has managed to keep world markets relatively stable, between $50 and $75 per barrel, for the past three years through its agreement.
The organization made the production cut in response to competition from non-OPEC suppliers, especially US shale oil production. Birol predicted that shale would remain a rival, but slow down, in 2020.
“I think we will start to see slowing down of the shale production in the United States, they will still grow, but the growth will be slower,” he said.
Birol also highlighted climate change as a significant challenge for the industry.
Although the new production at $65 per barrel will be “good enough” for the industry, marrying this investment with solutions to climate change demands will remain challenging, said Birol.