Weak demand and oversupply in oil markets raise the risk of global social instability and the potential for financial defaults, the International Energy Agency (IEA) warned on Friday, as it cut its forecasts for global oil demand growth in 2015.
The report came as oil prices slid to new multi-year lows, with Brent crude hitting a 5-½ -year low of $63.33 a barrel on Friday.
“Continued price declines would for some countries and companies make an already difficult situation even worse,” the IEA said in its new monthly report.
Global oil inventories are projected to build by around 300 million barrels in the first half of 2015 in the absence of any disruption, the group said. It estimated that stocks in major global economies could start to “bump” against storage capacity limits.
“The resulting downward price pressure would raise the risk of social instability or financial difficulties if producers found it difficult to pay back debt,” it said.
Singling out Russia and Venezuela, the Paris-based energy think tank said that further price drops would heighten the financial risks to “highly leveraged” producers, and countries that are heavily dependent on oil revenues.
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