The International Energy Agency (IEA) said on Tuesday that the rise in oil prices could soon subside as the US leads the recovery in global supply.
Oil prices have jumped to over $ 80 a barrel in recent weeks, reaching the highest level in seven years as demand outstrips supply. The price rally has led some analysts to predict a return of oil to $ 100 a barrel, but not all analysts share this view, including Mohamed El Erian, Chief Financial Officer of Allianz and President of Gramercy Fund Management.
“The global oil market remains tight, but there may be a ‘break’ in the price rally,” the IEA said in its monthly report.
“Contrary to what was expressed at COP26 in Glasgow, this is not due to declining demand, but rather to an increase in oil supply,” the report said.
Demand for oil is also boosting due to strong gasoline consumption and increasing international travel as more countries reopen their borders, the IEA said.
However, higher oil prices, weaker industrial activity and a worrying “resurgence” of coronavirus outbreaks in Europe are likely to curb price increases, the agency added.
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.
In terms of supply, the agency said it expects an increase of 1.5 million barrels per day in world oil production in the fourth quarter, with the US accounting for 400,000 barrels of this increase. Saudi Arabia and Russia are expected to account for 330,000 barrels a day from the increase, according to OPEC + targets.
The IEA revised its forecast for global oil supply higher by 330,000 barrels per day for the fourth quarter to 99.2 million barrels per day by the end of the year. This is an annual increase of 6.4 million barrels per day.
The IEA said that while stronger oil prices have pushed some US producers to increase production, the same is not true of OPEC +.
It is noted that OPEC + decided to maintain a stable production policy in early November, increasing production by 400,000 barrels per day, defying US pressure to increase production.
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