Oil prices under pressure due to coronavirus, excess oil supply: IEA's Birol

Oil prices are under downward pressure and have been immune to geopolitical risk due to a market awash with crude and the impact of the coronavirus on demand, the International Energy Agency's Executive Director Fatih Birol said on Tuesday.

Speaking at IP Week in London, Birol highlighted an "abundance of oil" as keeping Brent prices close to $60/b despite huge losses of supply from sanctions-hit Venezuela, and Iran and civil war-wracked Libya along with the attacks on Saudi Arabian oil facilities in September.

"If only one of these incidents, geopolitical tensions, had happened a few years ago we would have seen oil prices skyrocket," Birol said, pointing to the huge excess of oil due to the rise in production in countries such as the US, Brazil and Iraq.

Venezuela and Iran had "disappeared from the oil market" Birol said, while Libya had lost 1 million b/d this year due to the ongoing blockade at ports and a domestic political crisis.

"Now, due to the coronavirus we may very well see further downward pressure on oil prices," he warned, highlighting the imbalances being created in the oil market.

ICE Brent April futures, which plunged 4% on Monday on fears over the growing global spread of the virus, were trading down 23 cents at $56.07/b at 1211 GMT Tuesday.

Limited OPEC+ deal impact

Birol also said he believed OPEC's alliance with Russia and other non-OPEC producers was becoming "more and more limited" in "determining the market dynamics" due to the strength of US shale and other non-OPEC supply growth.

OPEC's crude output tumbled in January to 28.86 million b/d, the lowest since the global recession of 2009, the IEA estimated in its latest oil market report, marking the first month of deeper OPEC+ cuts. A port blockade also cut Libyan flows sharply, with January production 360,000 b/d lower than December's at an average 780,000 b/d.

Birol did acknowledge that shale's rise had slowed but insisted it would play an important role into the next decade.

OPEC and his partners plan to meet on March 5-6 to discuss its current 1.7 million b/d production cut deal and whether it needs to deepen or extend those cuts in response to the effects of the coronavirus outbreak on oil demand.

Birol said the oil market would become increasingly "inelastic" and prices wouldn't be where oil producers would like them to be, warning those who were heavily reliant on revenues from hydrocarbons to take this into account.

The IEA head talked up the importance of energy transition and the role oil and gas producers have to play in treating "seriously" the reduction of emissions through the "bedrock of efficiency and renewables."