IEA sees potential reprieve as US production increases

Oil pump jacks are pictured in the Kern River oil field in Bakersfield, California.

Jonathan Alcorn | Reuters

LONDON – The International Energy Agency said on Tuesday that the surge in oil prices may soon come down as the United States leads a rebound in global supply.

Oil prices have climbed above $ 80 a barrel in recent weeks, hitting their highest level in seven years as demand outstrips supply. The momentum behind the price rally even tempted some forecasters to predict a return to $ 100 a barrel of oil, although not everyone agrees.

“The global oil market remains tight in all respects, but a reprieve from rising prices could be on the horizon,” the IEA said in its closely watched monthly report.

“Contrary to the hopes expressed in Glasgow at COP26, it is not because demand is falling, but rather because of the increase in oil supplies.”

Demand for oil is also strengthening due to high gasoline consumption and increased international travel as more countries reopen their borders, the influential energy agency said.

Higher oil prices, weaker industrial activity and an alarming resurgence of Covid-19 infections in Europe, however, are likely to temper price hikes, the group added.

Futures on international benchmark Brent crude traded at $ 82.58 per barrel on Tuesday morning in London, up about 0.6%, while futures on West Texas Intermediate in the US United was $ 81.28, more than 0.5% higher.

The IEA has kept its forecast for oil demand growth largely unchanged from last month at 5.5 million barrels per day for 2021 and 3.4 million barrels per day for 2022.

“The offer is finally on the rise”

“As we head towards the end of the year, we expect continued strong growth in demand, but supply is finally on the rise,” said Toril Bosoni, oil market analyst at the International Energy Agency, to CNBC’s Street Signs Europe. .

“So OPEC + continues to unravel its cuts, but we are also seeing an increase in supplies from other producers outside the group and therefore we are seeing the market getting closer to equilibrium.”

The IEA has said it expects a 1.5 million barrels per day increase in global oil production in the last three months of the year, with the United States alone accounting for 400,000. barrels of this growth.

OPEC mainstay Saudi Arabia and non-OPEC leader Russia are each expected to account for 330,000 barrels per day of the increase, in line with their OPEC + objectives. By December, Saudi Arabia and Russia are each expected to pump more than 10 million barrels a day for the first time since April last year, the IEA said.

The energy agency revised its forecast for world oil supplies from 330,000 barrels per day up for the fourth quarter to 99.2 million barrels per day by the end of the year. That’s an increase of 6.4 million barrels per day year over year.

The United States is expected to account for 60% of non-OPEC + supply gains next year, now forecast at 1.9 million barrels per day, although the country is not expected to return to pre-Covid levels until after the end of 2022.

The IEA said that while the rise in oil prices had prompted some US producers to increase their production, the same was not true of OPEC +.

The energy alliance decided to maintain a stable production policy in early November, increasing production by 400,000 bpd, defying pressure from major consumers for a larger increase to help cool the market.

The group of oil producers is scheduled to meet again on December 2.

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Felix J. Dixon