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The sharp rise in oil prices may soon come to an end, the International Energy Agency (IEA) believes. Production is picking up again, especially in the US.
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The oil price has had an impressive but also worrying rally. Since the beginning of this year, the price of a barrel of Brent oil has almost doubled to peak above $85 at the end of October, the highest level in seven years.
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The steep climb is a result of the rapid economic recovery and the robust demand for oil that comes with it. However, oil production, which had been reduced due to the corona crisis, only slowly followed. Demand for oil has temporarily increased due to skyrocketing natural gas prices as some consumers have switched from gas to oil.
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The shortage should soon come to an end, the IEA says in its latest monthly report. Supply is picking up again and the changes in oil inventories we saw in October indicate ‘the tide may be turning’. When that comes true and oil prices start to fall again, not only will consumers breathe a sigh of relief, but also many companies that depend on petroleum. And let’s not forget the central bankers, for whom high inflation is a concern.
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Gulf and shale oil
The world oil market will remain tight anyway, but a suspension of the price rally could be in the offing.
International Energy Agency
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The world oil market will remain tight anyway, but a suspension of the price rally could be in the offing, the IEA believes. It refers to oil production in the United States, which is increasing again thanks to strong oil prices. Production in the Gulf of Mexico, which had fallen sharply due to Hurricane Ida, is picking up again and shale oil producers are trying to take advantage of good prices.
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According to the agency, global oil production increased by 1.4 million barrels per day in October and is set to increase again in November and December. Part of that is also due to the OPEC+ countries increasing their production by 400,000 barrels per day each month. The Saudi Arabia-Russian-Led Alliance rejected early this moond a request from US President Joe Biden to pump more.
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