The International Energy Agency (IEA) has said that global crude oil prices could rise higher if current targets are maintained.
It stated this in its oil market report, released on Friday, August 11.
According to the report, global oil prices moved steadily higher during July and into early August, reflecting a market tightening.
The report also stated that oil market balances are set to tighten further into the autumn season as Saudi Arabia and Russia extend supply cuts at least through September.
Recall that Nairametrics reported that Saudi Arabia decided to extend its voluntary crude production cuts to September 2023.
Meanwhile, a recent Platts survey by S&P Global Commodity Insights revealed that in July 2023, crude production from OPEC-13, reached a near two-year low in July 2023 as a major voluntary cut by Saudi Arabia took effect.
Also, disruptions in Kazakhstan and Nigeria, offset gains in Iran and Iraq, contributing to an almost 1 million barrel per day (bpd) fall in OPEC+ output month-on-month.
According to the IEA oil market report, an ample OPEC+ spare capacity cushion of 5.7 million barrels per day means there is significant scope for the alliance to raise crude production output later in 2023.
A part of the report stated:
- “Additional supplies of heavy sour crude would allow refiners to boost activity and help ease product market tensions. But if the bloc’s current targets are maintained, oil inventories could draw by 2.2 million barrels per day Q3/2023 and 1.2 million barrels per day in Q4/2023, with a risk of driving prices still higher.”
Note that on Friday, August 11 at 12 Noon (GMT+1), Brent crude price was $86.68 per barrel.
Demand and supply projections
The IEA report also stated that global oil demand is reaching record highs due to the following factors:
- Strong summer air travel
- Increased oil use in power generation
- Surging Chinese petrochemical activity
Meanwhile, global oil demand is set to expand by 2.2 million barrels per day to 102.2 million barrels per day in 2023, with China accounting for more than 70% of growth.
The report highlighted the fact that the global oil supply plunged by 910,000 barrels per day (kb/d) to 100.9 million barrels per day (mb/d) in July 2023.
A sharp reduction in Saudi production in July saw output from the OPEC+ bloc fall 1.2 mb/d to 50.7 mb/d, while non-OPEC+ volumes rose 310 kb/d to 50.2 mb/d.
IEA projects global oil output to expand by 1.5 mb/d to a record 101.5 mb/d in 2023, with the US driving non-OPEC+ gains of 1.9 mb/d. In 2024, non-OPEC+ supply is also set to dominate world supply growth, up 1.3 mb/d while OPEC+ could add just 160 kb/d.
