It’s a marked reversal for the Paris-based agency, which just a month ago urged the OPEC + alliance to turn on the taps or risk a damaging price spike. The oil cartel has responded to calls to increase supply, which now comes as consumption slows.
The analysis also clashes with Wednesday’s call from the United States – the IEA’s most influential member – to the Organization of the Petroleum Exporting Countries and its allies to step up production.
“OPEC + ‘s immediate impetus comes up against slower growth in demand and higher production from outside the alliance, eliminating lingering suggestions of tight supply in the near term or of a super cycle, ”the IEA said in its monthly report.
Oil prices fell 6% this month as the contagious delta variant triggers further lockdowns in China and other key Asian consumers where vaccination rates are lagging behind. Brent futures are trading at nearly US $ 71 a barrel, after hitting a two-year high near US $ 78 in early July.
The “recent rally has run out of steam over fears that an increase in Delta variant COVID-19 cases could derail the recovery as more barrels hit the market,” the IEA said.
The Saudi-Russian-led OPEC + coalition of 23 countries agreed last month on a roadmap to restore the rest of the oil supplies it shut off when the pandemic hit. The extra barrels start to flow at an unsuitable time, however.
Global demand for oil “turned sharply” last month, declining slightly after jumping 3.8 million barrels per day in June, the IEA said. The agency lowered consumption estimates in the second half of the year by 550,000 barrels per day.
Still, the IEA predicts that global fuel consumption will continue to rise as the global economic recovery accelerates, averaging 98.9 million barrels per day in the last three months of this year.
The recovery achieved so far already has unwanted side effects.
As American motorists grapple with US $ 3 a gallon gasoline and fear inflation, the Biden administration is insisting OPEC + accelerate its supply increases. “At a critical time in global recovery,” OPEC’s plans are “simply insufficient,” National Security Advisor Jake Sullivan said in a statement on Wednesday.
The Organization of the Petroleum Exporting Countries appeared to push back US demand a bit in its own monthly report, also released on Thursday, which said the “precarious outlook” still requires “determined efforts” from its members and producers. allies.
The IEA and OPEC have both significantly bolstered non-cartel supply forecasts in 2022 as the United States and other producers recover from the pandemic investment crisis. The two institutions have inflated non-OPEC production projections by 1.1 million barrels per day for next year.
As a result, OPEC is already producing the volume of crude needed in 2022, according to the IEA report. With production of 26.7 million barrels per day in July, continued plans to restore more production will likely tip the market towards oversupply.
“The scale could become surplus again in 2022 if OPEC + continues to reverse its cuts and if producers not participating in the deal increase in response to the price hike,” the agency said.