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IEA points to ‘substantial surplus’ as oil demand growth slows

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The Western energy watchdog has said the world could generate a “substantial surplus” of oil this year as faltering economic growth hits demand and non-OPEC countries ramp up production to record levels. .

The International Energy Agency said Thursday that an increase in production from countries like the United States can offset the impact of cuts by OPEC+, the cartel of oil exporters, which seeks to prop up prices.

The IEA monthly report adds that while the recent cuts agreed by the cartel “may push the oil market into a small deficit at the beginning of the year, strong growth from non-OPEC producers could lead to a surplus.” substantial”.

He said this outcome would likely occur if additional voluntary cuts in OPEC+ countries were phased out in the second quarter of this year.

The cartel’s efforts to support prices above $80 a barrel have been hampered by internal divisions and production from other countries.

OPEC+, which includes OPEC members and countries such as Russia and Kazakhstan, has announced several rounds of cuts starting in October 2022.

But the most recent cuts from countries like Saudi Arabia and Russia have been additional voluntary reductions whose future is less certain.

The IEA predicted demand would grow this year at only about half the pace of 2023: an average of around 1.2 million b/d this year, instead of 2.3 million b/d last year. .

It attributed this to slowing growth in the world’s major economies, with the impact of the end of China’s Covid-19 restrictions fading, as well as a rise in sales of electric vehicles.

However, Thursday’s report marked a slight upward revision to the IEA’s growth forecast from last month, when it predicted demand would increase by 1.1 million b/d.

The IEA, which is mainly funded by the OECD, acknowledged that the risk of oil supply disruption due to “increasing geopolitical tensions” in the Middle East remained high. But it said it was ready to respond “decisively” if necessary, with members holding combined reserves of 4 billion barrels.

Despite continued uncertainty over the Red Sea, one of the world’s main oil routes, prices remained broadly stable on Thursday, with benchmark Brent crude rising 0.5 percent on the day to $78.31. the barrel.

The IEA added that record production from the US, Brazil, Guyana and Canada will help boost global supply this year by 1.5 million b/d to a record 103.5 million b/d.

Such increases would force OPEC+ to decide whether to implement further cuts, at the risk of losing more market share as supply outstrips demand.

The IEA report contrasts with OPEC analysis, which predicts that oil demand will continue to grow steadily, around 2.3 million b/d this year, before falling to a still “robust” level 1. 8 million b/d in 2025.

The two organizations have been at odds over the future of fossil fuels as governments look to shift to renewable energy.

IEA executive director Fatih Birol has argued that the organization’s analysis shows that oil demand will peak this decade. But Haitham al-Ghais, OPEC secretary general, rejected such suggestions and called for more investment in the industry.

“Today, what is clear is that peak oil demand does not appear in any reliable and robust short- and medium-term forecasts,” Ghais said this week.

He added that it was a “challenge to see peak oil demand by the end of the decade, just six years from now.”

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