High oil prices at the moment could help speed up the energy transition, but also slow down the recovery from the pandemic, especially in emerging economies. This is the conclusion of the analysts from the International Energy Agency (IEA) in the next monthly report on the oil market.
They remind that the producers from OPEC + have so far failed to agree on the increase of production since August, due to the position of the UAE, which wants an increase in the basic level of production of the country, which reduces production quotas.
As a result, the price of Brent oil is trading at about $ 75 a barrel, with the prospect of reduced supply if no agreement is reached on production growth.
“At the same time, the oil market faces the possibility of a battle for market shares, even given the prospect of high fuel prices accelerating inflation and damaging the fragile economic recovery,” analysts said. In this spirit, they note the uncertainty regarding the potential impact on the prices of the spread of the Delta coronavirus strain in the coming months.
If OPEC + production remains at the level of quotas from July, the situation will be too tense, as demand will slow after recovering from last year’s decline as a result of the pandemic. The surplus of trade stocks accumulated last year is gone. The reserves are currently below the average historical level, the IEA notes.
The oil balance is expected to be extremely tense
To meet growing demand, refineries are accelerating processes. The current balances suggest that the third quarter of 2021 may see the most significant depletion of oil in at least a decade, according to the IEA.
Oil reserves are also declining, despite travel restrictions. Data on mobility in the United States in recent weeks show levels well above those before the pandemic, the IEA report said.
“Although prices at these levels can increase the level of electrification in the transport sector and help speed up the energy transition, they can, at the same time, slow down the energy transition as well as economic recovery, especially in developing countries.” experts say, taking into account the rise in US gasoline prices for the first time in 7 years, higher fuel prices at gas stations in Europe, as well as the highest in the history of gasoline and diesel in India.
“Oil markets are likely to remain volatile until OPEC + policy becomes clear. And uncertainty will not help bring about an orderly and secure energy transition – it is not in the interests of either oil producers or consumers,” they wrote. IEA experts.
The IEA’s forecast for oil demand in 2021 has been raised and reduced for the next 2022.
The IEA raises its forecast for oil demand by 40,000 barrels per day in 2021. At the same time, the agency lowers its forecast for 2022 by 60,000 barrels per day, according to the Agency’s monthly report.
Its experts are revising their forecast for growth in oil demand in 2021 compared to last month, thanks to higher demand growth than expected so far in countries such as China, Kuwait and the United States. According to the current forecast, in 2021 the demand for oil will increase by 5.4 million barrels per day – an average of 96.4 million barrels per day.
Expectations for 2022 have been revised downwards – up to 3 million barrels per day. Demand for oil in 2022, according to IEA expectations, will be in the range of 99.5 million barrels per day.
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