Soaring oil prices could be reduced by a global rebound in supplies, the International Energy Agency (IEA) said yesterday.
In its November oil report, the organisation argued “the tide might be turning” in the market as supplies catch up with demand.
The IEA now expects oil production to increase by 1.5m barrels per day over the next two months, meaning a reprieve from soaring prices “could be on the horizon”
However, the market remains tight and demand continues to be strong despite environmental pledges at Cop26 in Glasgow made by world leaders to reduce carbon emissions.
OPEC+ is still refusing to commit to more than 400,000 barrels a day through 2022, but the US will boost its supplies by 1.14m barrels per day.
It will offer the largest increase in supply of any individual country and account for 60 per cent of non-OPEC + supply gains – forecast at 1.9m barrels per day.
More supplies follow hefty inventory declines in September that caused Brent and WTI to reach nine-year highs of $86 and $84 a barrel respectively.
Prices have since retreated to below $82 on both benchmarks.
Total oil supply had already leapt 1.4m barrels per day month-on-month in October after the US rebounded from Hurricane Ida.
Nevertheless, the US will not return to pre-Covid rates until the end of 2022.
“The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon… due to rising oil supplies,” the IEA said.
“Current prices provide a strong incentive to boost (US) activity even as operators stick to capital discipline pledges.”
Including price assumptions in monthly reports is rare, but not unprecedented, the IEA told Reuters.
In its report last month, the IEA’s assumption for the average 2022 Brent price was $76.80, while for 2021 it was $70.40.
“We publish our price assumptions when we think that this can be useful for the understanding of our forecast,” the IEA said. “As current prices are getting more elevated, they start to have a significant effect on demand.”