Opec accuses IEA of stoking ‘volatility’ in energy markets

Opec has claimed the International Energy Agency’s calls to halt investment in oil are triggering turmoil in energy markets, intensifying a war of words between producers and rich-world consumers.

Opec secretary-general Haitham Al Ghais accused the IEA, which is funded by the OECD group of rich economies, of “finger pointing” after the agency warned the surprise production cuts announced by the oil cartel earlier this month risked exacerbating inflation.

The Kuwaiti secretary-general, who is seen as close to Opec’s other Gulf members such as Saudi Arabia, also criticised the IEA for discouraging investment in new oil and gas projects. “If anything will lead to future volatility it is the IEA’s repeated calls to stop investing in oil,” said Al Ghais.

The open criticism illustrates a wider breakdown in relations between the oil producers’ group and developed economies, with Opec’s Gulf Arab members taking a more assertive stance on oil policy.

Saudi Arabia led the expanded Opec+ group, which includes Russia, in announcing a production cut of 2 per cent of world supply this month.

The move was broadly viewed as designed to boost oil prices, though the price of a barrel of Brent crude, the global benchmark, is now at the same level as when the cut was made.

Since first reducing output in October, the kingdom has largely ignored pressure from the US to keep oil production high. At the time of the October cut, the White House accused Opec of effectively collaborating with Russia, despite its invasion of Ukraine.

Western countries have tried to slash the amount of energy revenue flowing into the Kremlin but some of its sanctions have frustrated and concerned other energy producers.

Opec members were particularly aggrieved at the use of a “price cap” on Russian oil exports by G7 members, which sought to limit Moscow’s oil revenues to less than $60 a barrel by restricting access to western insurance and shipping markets.

Opec members have indicated they fear a similar tactic could one day be deployed against them.

Fatih Birol, the IEA executive director, on Wednesday told Bloomberg Television Opec had to be “very careful” if it pushed prices up, warning the global economy was “in a very fragile state”.

“To see higher oil prices and upward pressure on inflation —
that is the last thing that we want.”

Opec pointedly echoed Birol’s words in its statement that was titled “IEA should be very careful about further undermining oil industry investments”.

The IEA has said in recent years that there can be no new oil, gas or coal developments if the world is to curb the impact of climate change. But the agency has also warned governments are not moving quickly enough to damp demand.

Opec and the IEA had spent much of the past 15 years trying to foster closer dialogue between producers and consumers, but tensions have risen between the two organisations since the start of the energy crisis in 2021.

IEA officials were at the Opec Secretariat in Vienna when the statement was published. The officials were there for technical discussions with the group, alongside analysts from the Riyadh-based International Energy Forum. Neither Birol nor Al Ghais were present at the meeting, though the latter addressed it by video link.

Opec has a long history of arguing its production policy is not aimed at price, partly as it fears “NOpec” legislation in the US — which stands for the No Oil Producing and Exporting Cartels — which would allow Washington to sue the group for manipulating prices.

The statement on Thursday claimed that Opec’s cuts to production were “not targeting oil prices” but focused “solely on market fundamentals and enabling vital oil industry investments”.

“The IEA knows very well that there are a confluence of factors that impact markets,” Al Ghais added, in a statement that accused the IEA of “misrepresenting” Opec+’s actions. The statement claimed that the oil cartel’s cuts to production were “not targeting oil prices”.