MercoPress. South Atlantic News Agency

Oil at 70 USD per barrel threatens fragile global recovery, says IEA

Chief economist Fatih Birol expects OPEC not to boost prices to harmful levels next September

A fragile global economic recovery will be hurt if oil prices stay at 70 USD per barrel or rise higher, according to International Energy Agency (IEA) Chief Economist Fatih Birol. The IEA advises 28 industrialised countries.

He added that Europe was likely to face a glut of gas by 2015 and it may be hard to garner support for both the rival schemes for gas pipelines across Turkish territory, one of which is backed by the European Union, the other by Russia.

Birol told reporters he did not want a decision by the Organization of the Petroleum Exporting Countries (OPEC), which is to meet on September 9, to boost oil prices to harmful levels.

“The decision I think they will take will foster the economic recovery, rather than dampen the economic recovery hopes” Birol said in an interview late Monday.

“We would not like to see prices going up to levels that would be a risk to the global economic recovery.” If the prices go much higher than today “I think that would be a problem for the economic recovery; 70 USD and above, especially for oil importing countries” said Birol.

Birol said the IEA would revise its forecast that saw upstream investment fall 21% in 2009. Birol said he saw more order cancellations than new investment, but declined to give a specific figure. The updated forecast would be released for the IEA world energy outlook in November, he said.

Birol said there may not be enough natural gas demand in Europe to support both competing major pipeline projects, Nabucco and South Stream, when they are expected to go on line.

The EU-backed Nabucco pipeline project aims to deliver 31 billion cubic metres of Caspian or Central Asian gas to Europe by 2014, while the rival Russian-sponsored South Stream project plans to pump Russian and other gas from 2015.