Rising oil prices could constrain demand growth, says IEA

Rising crude oil prices are expected to curb demand growth, as prices are set to rise further on the potential supply shortfall from Iran and Venezuela, the International Energy Agency (IEA) said in its monthly report.

The Paris-based agency lowered its estimates for oil consumption growth for 2018 to 1.4 million barrels per day (bpd), from 1.5 million, as total demand is expected to stand at 99.2 million bpd.

“We expect a slowdown in demand growth in H2 2018, largely driven by rising oil prices,” the IEA said in the report.

Crude oil prices have increased by nearly 75 percent since June 2017; it would be extraordinary if such a large jump did not affect demand growth, the report said.

    
Prices could even rise further as supplies from Iran take a hit following new sanctions from the US, besides an accelerating drop in production and exports from Venezuela amid political and economic turmoil, the report added.

“The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality,” the IEA said.