Recovery could derail if commodities surge on QE2: IEA

SINGAPORE (BestGrowthStock) – The global economic recovery could derail if commodity prices rise further after the U.S. Federal Reserve’s move on further quantitative easing, details of which are expected next week, an official with the International Energy Agency (IEA) said on Wednesday.

Eduardo Lopez, IEA’s senior oil demand analyst, said the impact of QE2 was unclear because it had not started, but it means basically the United States will print more money.

Dollar weakness on expectations of further quantitative easing has helped drive commodities and oil prices for at least a month.

“If commodities’ prices surge further, it could derail recovery,” he told a downstream oil conference in Singapore.

“QE2 could inflate prices in nominal terms and bring about inflation and could derail the recovery.”

The Fed is expected to unveil details of the so-called QE2 at its November 2-3 meeting and financial markets remain concerned over whether the U.S. currency has fallen too much in anticipation of what the central bank will do.

Lopez also highlighted divergent views on whether global oil markets next year would be tight.

“To us, it is not the case. According to some banks it is,” he said. “According to our demand-supply profile, it does not look particularly tight.”

Lopez said the IEA, which advises 28 developed countries, expected surplus refining capacity to rise as the additions would be expected to exceed projected growth over 2012-2015.

The global refinery utilization rate is seen falling to an average of 78 percent by 2015 versus 84 percent in 2008, he said.

World demand growth will be heavily biased toward middle distillates — diesel and kerosene — accounting for 62 percent of total growth by 2015, he said. “This would imply massive refining bottleneck somewhere,” he added.

On the other hand, naphtha and gasoline will be potentially oversupplied and demand is set to be weak.

(Reporting by Jennifer Tan; Writing by Ramthan Hussain; Editing by Clarence Fernandez)

Recovery could derail if commodities surge on QE2: IEA