The International Energy Association (IEA) said this week that the current surge in oil price should abate.
Available here, the monthly report said that while the world oil market remains ‘tight by all measures’, a reprieve could be ‘on the horizon’. Among the findings and predictions were that despite global demand increasing, further lockdowns caused by a resurgent coronavirus pandemic aligned with weaker industrial activity and higher oil prices should temper demand.
This is what the report’s authors wrote of a possible slowing price growth: “Contrary to hopes expressed in Glasgow at COP26, this is not because demand is declining, but rather due to rising oil supplies. Following another hefty inventory decline in September, benchmark crude oil prices surged by $9/bbl to fresh highs above $86/bbl for Brent and $84/bbl for WTI. However, preliminary data and satellite observations of stock changes in October suggest the tide might be turning.”
Global oil supply, the analysts said, was already growing.
They added: “In October, oil supplies leapt by 1.4 mb/d to 97.7 mb/d, with the US post-hurricane recovery accounting for half the increase. A further boost of 1.5 mb/d is expected over November and December even as Opec+ disregarded pleas from major consumers to ramp up beyond a monthly allocated 400 kb/d to cool prices. Over this period, the US is now poised to provide the largest increase in supply of any individual country.”
Whether this was evidence or not of a trend, oil prices fell to six-week lows this week, according to Reuters.
Published today, the news service said: “Brent crude was down $0.20, or 0.2%, to $80.08 a barrel by 1035 GMT, after earlier dropping to $79.28, the lowest since 7 Oct. US West Texas Intermediate crude futures were down $0.39, or 0.5%, at $77.97 a barrel, having fallen earlier to $77.08, also the lowest since early last month.”
Previous prices in October had hit a seven-year high that was reported to originate with increased demand following the end of lockdowns around the world. Political action by the US and Chinese heads of state, according to Bloomberg, has also been a factor in Opec raising production this week.