Firmer dollar, plentiful supply holding back oil price rise, says IEA executive

Firming up of the dollar against a basket of global currencies and current record levels of oil production will continue to hold back oil benchmarks from spiking over the medium term, according to Keisuke Sadamori, director of energy markets and security at the International Energy Agency.

Speaking at the World National Oil Companies Congress in London on Tuesday, the IEA expert and Japanese government official said: “We see plentiful supplies and a firmer dollar limiting a price spike. Despite easing from March and April’s highs, oil production growth [on an annualised basis] stood at a robust 3m barrels per day (bpd) split between OPEC and non-OPEC producers.”

Sadamori also opined that producers like Russia and US shale players were showing "much more resilience" than most in the market had anticipated. “All the while Saudi Arabia, Iraq and United Arab Emirates continue to pump oil at record monthly rates.”

That said, the IEA has officially forecast non-OPEC production to decline over the fourth quarter of this year; the first such instance for a fiscal quarter since the fourth quarter of 2011.

On the demand side, Sadamori noted that lower oil prices won’t necessarily trigger stronger demand growth. “Demand will take time to pick from the second half of 2015 onwards. Overall, demand is becoming less 'price elastic' the way we see things.”

In line with market expectations, Sadamori said that most of the oil demand growth will come from emerging markets, especially India, thereby shifting the centre of gravity of the oil trade east.