IEA: Saudi Arabia, UAE could raise oil production to cool volatile oil markets

Oil producers in the Gulf could help calm volatile oil markets if they pumped more crude, the International Energy Agency (IEA) said on Friday, and forecast a gradual return of Iranian oil back into the market if its global talks on lifting nuclear sanctions went well.

The UAE and Saudi Arabia are the two oil producers in the Gulf with the biggest spare production capacity. Falling global oil inventories have tightened supplies and have been among the factors pushing oil prices towards $100 a barrel – raising the risk of high inflation worldwide, the agency said.

“These risks, which have broad economic implications, could be reduced if producers in the Middle East with spare capacity were to compensate for those running out,” the Paris-based IEA said in its monthly oil report.

Oil stocks in OECD countries have slumped to seven-year lows, implying that immediate oversupply is unlikely, the agency said.

A successful outcome to international nuclear talks with Iran could help lift US sanctions and pave the way for gradually bringing 1.3 million bpd of Iranian oil back into the market, IEA said.