The boss of the International Energy Agency has warned that the major oil producers of the world must “take the right steps” to cool the market amid a continued increase in crude prices.
Fatih Birol, the executive director of IEA, stated: “It is now high time for all the players, especially those key producers and oil exporters, to consider the situation and take the right steps to comfort the market, otherwise I don’t see anybody benefiting.”
He said that the rise in oil prices, which is already above $85 per barrel, has placed immense pressure on various emerging economies.
He added: “Expensive energy is back at a bad time for the global economy.”
Just hours after the remarks of Birol, Khalid al-Falih, the energy minister of Saudi Arabia, said that the country would invest $20 billion in the next few years in order to maintain and potentially expand the country’s spare oil production capacity.
Falih said that the kingdom had not decided whether to raise its capacity – from a maximum of 12 million barrels per day to 13 million.
Talking at an energy industry event that was held in Moscow, he stated: “This spare capacity is not just a natural reservoir that we have.”
He added: “This is very expensive investments for the kingdom, and some of our partners within Opec and Opec+ have elected to invest to maintain [oil capacity] to have the readiness on a short notice.”
He continued: “The next 1m barrels per day of Saudi capacity is going to cost us over $20bn (£15.4bn). It costs us $2bn a year of operation expenses to staff and maintain these facilities.”
This afternoon, Brent crude oil was trading at $85.54 per barrel. It is down from a high of $86.43 that was recorded earlier in the day.
The oil prices have increased in recent weeks ahead of the sanctions of the US that are set to be imposed early next month on Iran.
Both Russia and Saudi Arabia have increased production as a result. However, last month Opec and non-Opec members ruled out a further increase to compensate for the anticipated loss of 2m barrels per day from Iran.
However, Reuters reported that the two countries have agreed on a private deal to increase oil output to temper the increasing prices.
This year, Donald Trump, the President of the United States of America, has slammed the Opec on various occasions. Most recently, he urged the oil cartel to “get prices down now.”