In light of the political turmoil in Egypt and the possible threat to Suez Canal shipping, rising oil prices and a tightening crude market are concerns of the International Energy Agency (IEA), its executive director, Nobuo Tanaka, told CNBC Thursday.
“If this $100 (per barrel) continues to hold for the year, the economic burden on the global economy, which is recovering, is very detrimental for the healthy recovery,” said Tanaka.
He added that high oil prices are a particular burden and threaten growth in developing nations and China, India and Africa.
Oil prices fell toward $90 a barrel Thursday, after the US dollar strengthened against the euro on positive US economic news.
“Demand is coming back,” he added. “In a tightening market, a small disruption may create a hike.”
People in Egypt have been killed in protests demanding the departure of long-time President Hosni Mubarak and unrest has been on the rise in other parts in the Middle East.
IEA’s oil outlook for this year is supply of 88.1 barrels a day and demand of 88.9 barrels. Tanaka said that IEA isn’t asking OPEC nations to increase their quota for this year, but to be “flexible” with production if world demand warrants it.
According to an IEA briefing paper on Egypt, the introduction of Very Large Crude Carriers (VLCCs) lessened the importance of the Suez Canal as a major choke point for crude oil coming from the Middle East destined for Europe and the US.
The VLCCs are too large to pass through the canal, so instead they make shipments around the African Cape at rates competitive with a Suez passage. Today, only one percent of the global crude oil supply goes through the canal.