IEA Says Oil’s Geopolitical Risks Are Offset by Plentiful Supplies
by Bloomberg | Grant Smith
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*this article was not written by Rosalind Oil & Gas
Geopolitical risks to oil output in the Middle East and elsewhere are being offset by plentiful global supplies, keeping prices in check, the International Energy Agency said.
While escalating tensions between Israel and Iran pose a danger to the region’s energy infrastructure, swelling American production is set to create an oil glut in early 2025, while spare capacity in the OPEC+ alliance is near record levels, the agency said in a monthly report.
“Heightened oil supply security concerns are set against a backdrop of a global market that – as we have been highlighting for some time – looks adequately supplied,” the IEA said on Tuesday. “For now, supply keeps flowing, and in the absence of a major disruption, the market is faced with a sizable surplus in the new year.”
Brent crude futures retreated 3.7% to trade below $75 a barrel on Tuesday following a report that Israel is willing to strike military rather than oil or nuclear facilities in Iran. Prices are down roughly 15% since early July.
The Paris-based adviser to major economies made only slight changes to its forecasts, projecting that global oil demand growth will slow to 860,000 barrels a day this year, and 1 million a day in 2025. That’s roughly half the rate seen in 2023, as a post-Covid rebound fades, economic activity cools in China, and the transition away from fossil fuels gathers pace.
“Chinese oil demand is particularly weak,” with consumption down 500,000 barrels a day in August compared with a year earlier, it said.
This subdued increase in world oil demand will be dwarfed by rising supply outside the OPEC+ coalition, which stands to climb by 1.5 million barrels a day this year and next thanks to growth in the US, Brazil, Canada and Guyana.
As a result, world markets face a surplus of more than 1 million barrels a day next year that will replenish inventories from their current low levels, according to the report. The excess will be considerably bigger if the Organization of Petroleum Exporting Countries and its allies proceed with plans to restore halted output in December.
OPEC+ has been withholding output since late 2022 in a bid to shore up prices, leaving key members with spare production capacity of more than 5 million barrels a day, according to the IEA. Outside of the 2020 pandemic, that’s a record level.
by Bloomberg | Grant Smith
click here to read this article at Rigzone.com
*this article was not written by Rosalind Oil & Gas