London — International Energy Agency Executive Director Fatih Birol on Monday denounced oil producer countries he said were playing "Russian roulette" with markets, adding that an apparent price war was an attempt to "kill" the US shale sector, but was unlikely to succeed and could have "grave consequences" around the world.
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Speaking in a webinar as the IEA slashed its demand forecasts in response to the coronavirus outbreak, Birol said the world faced a "major challenge" and "solidarity" was needed in the face of the current health crisis. He said the price crash of the last few days was "more severe" than that in 2014.
Birol alluded to the apparent price war that broke out among key producers last week with the breakdown of a meeting of OPEC and its erstwhile partners in production cuts, led by Russia.
"We have seen that some actors came up with the motto of killing the shale industry in North America," Birol said. "We will see whether or not shale will be killed...which I don't think so," he said, arguing that low prices might in fact serve consolidation in the shale industry.
"At a time of such uncertainty and potential vulnerability for the world economy, playing Russian roulette in oil markets may well have grave consequences," he said.
At such price levels major producing countries such as Iraq, Angola and Nigeria would find it "impossible" to finance public services such as education and health and as a consequence may face "challenges" maintaining their stability, Birol said.
Higher cost production around the world, including in China, West Africa, Latin America, North America and the North Sea, would face substantial pressure, Birol said.
Referring to the sharp reduction in oil demand in Q1, estimated by the IEA at 2.5 million b/d, Birol said: "This situation has no equal in oil market history."