Dear clients,
OPEC+ supply cuts could lead to lower oil inventories for the rest of this year, which could lead to further price increases before economic factors limit global demand growth in 2024, the International Energy Agency (IEA) said on Friday.
The IEA said that if current OPEC+ targets are maintained, oil inventories could fall by 2.2 million barrels per day (bpd) in the third quarter and 1.2 million bpd in the fourth quarter, „which could lead to further price increases“.
„The deepening of OPEC+ supply cuts has collided with improving macroeconomic sentiment and record-high global oil demand,“ the Paris-based energy organisation said in its monthly oil market report.
Demand growth is forecast to slow sharply to 1 million bpd next year, the IEA said, citing weak macroeconomic conditions, a fading post-pandemic economic recovery and the growing use of electric vehicles.
The IEA’s forecast for demand growth is down 150,000 bpd from last month and is at odds with OPEC, which on Thursday maintained its forecast that oil demand in 2024 will grow by a much larger 2.25 million bpd.
For 2023, the IEA and OPEC views are less far apart.
The IEA expects demand to grow by 2.2 million bpd in 2023, fuelled by summer air travel, increased oil use in the power sector and rising petrochemical activity in China. OPEC expects growth of 2.44 million bpd.
The projections show an average of 102.2 million bpd of demand this year, with China accounting for more than 70% of the growth, despite concerns about the economic health of the world’s top oil importer.
Oil prices fell more than 1% on Monday as concerns about China’s fragile economic recovery and a stronger dollar dampened seven-week gains amid supply cuts from OPEC+ production cuts.
Reflecting the supply cuts, the price spread between first- and second-month Brent crude was unchanged on Monday after settling at 67 cents on Friday, the widest since March.
