Tension on the oil market may be easing, the International Energy Agency (IEA) said yesterday in a report, offering some hope for the global economy, but sanctions could cause production by Iran to "plummet".
Oil prices have been on a rising trend since late 2009, when the world economy began to recover from the financial crisis, to the point where many analysts say they could now derail growth.
Prices hit 2011 highs again in March but have since fallen, the IEA said in its latest monthly report, with its 2012 oil demand growth forecast unchanged at 800,000 barrels per day (bpd) to 89.9 million.
In its previous report in March, the IEA had warned of "a heady brew of both real and anticipated supply-side risks," chief among them concerns over Iran's nuclear programme, but this time it believed the pressures were easing.
"Acknowledging that data remain preliminary, first quarter 2012 fundamentals nonetheless show a clear shift from the seemingly relentless tightening evident over the prior 10 quarters [from third quarter 2009]," it said.
It said an increase of 1.2 million bpd in Opec supply compared with the level in the fourth quarter of 2011 implied a significant 1 million bpd increase in stocks
"Together with Saudi supply assurances, market speculation on a potential strategic stock release and hopes pinned on multilateral talks over Iran's nuclear programme, easing ... fundamentals have seen prices recently lose most of the $5 [per barrel] they gained in March."
The increase in stockpiles may mean that "the cycle of repeatedly tightening fundamentals evident since 2009 has been broken for now," it said. "We cannot discount the possibility that prices will remain high so long as geopolitical uncertainties remain.
"Further surprises almost inevitably lurk around the corner for both demand and supply. But for now at least, the earlier tide of remorseless market tightening looks to have turned," the IEA added.
If that turns out to be the case, it will be a welcome relief after a series of weaker US, Chinese and European data undercut hopes on the economic outlook.
On Wednesday, the US Federal Reserve warned that higher petrol (gasoline) prices were clouding the outlook by crimping consumer spending, a key driver of economic growth.