London — Current oil prices near four-year highs reflect market "perceptions" of a potential supply shortage rather than an actual inability of OPEC and its key producer allies to pump sufficient oil, OPEC Secretary General Mohammad Barkindo said Thursday.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
The global oil market remains "well supplied" and the top oil producers are ready to produce more oil in the coming months as concerns over a further drop in Iranian exports from US sanctions continue to fuel prices.
"The market has been reacting to perceptions of a supply shortage, it is not really as such. The balance may be fragile as a result of non-fundamental factors, but I remain confident that we will overcome," he told reporters on the sidelines of the Oil and Money conference in London.
Market concerns that OPEC will struggle to plug a supply gap from lower Iranian supplies and slipping Venezuela supplies helped pushed Brent crude to a new four-year high above $85/b last week.
"There is no doubt that the current market conditions are being driven by conditions elsewhere outside OPEC," he said.
Nevertheless, Barkindo also said that OPEC producers are "very concerned" about current spare production capacity in the industry but said the concerns are related to the slump in upstream spending since the 2014 oil prices slump.
"We are very concerned, not just about spare capacity per se, but you have to look spare capacity within the context the sharp reduction in investments," he said.
OPEC's top producer Saudi Arabia last week said it believes it can pump a further 1.3 million b/d if required to meet a shortfall from Iran and Venezuela.
OIL DEMAND IMPACT
On oil demand, Barkindo said he received a letter from India, one of the world's top oil importers, in recent weeks expressing "discomfort" over the current oil market.
"Some of our very powerful customers seem to be uncomfortable," he said noting that the letter expressed "some discomfort with the evolution of the (oil) market"
"As one of our major consuming countries, of which we have an official energy dialogue, it was also a concern for us getting this feedback from India," he said.
The comments come as some market watchers believe current oil prices of around $85/b are starting to curb oil demand growth, particularly in emerging economies.
"We are equally concerned with the response of the consuming countries as a result of current volatility and market conditions that impacts their demand profile... We will continue to do our utmost to ensure there is no shortage," he said.
"I'm confident, hearing from our largest producers, that they are ready, willing, and capable to ensure that this market remains well supplied."
--Robert Perkins, email@example.com
--Edited by Maurice Geller, firstname.lastname@example.org