The International Energy Agency (IEA) warned on Friday that OPEC+ supply curbs might deplete oil inventories in the remaining months of this year, potentially raising prices even more, before economic headwinds cap global demand growth in 2024.
Brent crude prices reached highs of over $88 a barrel on Thursday, the highest since January, as a result of tighter supplies brought on by OPEC and its allies, collectively known as OPEC+, cutting their oil output. These production cuts have also been accompanied by an increase in global demand.
Oil inventories could decrease by 2.2 million barrels per day (bpd) in the third quarter and 1.2 million bpd in the fourth, according to the IEA, if OPEC+ present targets are maintained, “with a risk of driving prices even higher.”
“Deepening OPEC+ supply cuts have collided with improved macroeconomic sentiment and all-time high world oil demand,” the Paris-based energy watchdog said in its monthly oil market report.
In order to support the market, the Organisation of the Petroleum Exporting Countries (OPEC) and its allies started to restrict production in late 2022. In June, they extended supply restraints into 2024.
According to the IEA, a significant drop in Saudi Arabia’s output in July contributed to a 910,000 bpd drop in world oil supplies. However, the IEA reported that in July, Russian oil exports were stable at about 7.3 million bpd.
According to the IEA, demand growth is expected to significantly drop down to 1 million bpd next year due to the growing popularity of electric vehicles, sluggish macroeconomic conditions, and a post-pandemic recovery that is running out of steam.
