The International Energy Agency (IEA) recently released a report indicating unexpected changes in the global oil market, predicting potential shortages despite expected oversupply.
IEA Supply and Demand Forecasts
The IEA raised its forecast for world supply growth this year to 2.1 million barrels per day, an increase of 300,000 barrels from its previous estimate. At the same time, it trimmed its demand growth outlook to 700,000 barrels per day. While this creates an impression of significant oversupply on paper, the IEA warns of strong refining demand due to summer travel and power generation needs.
Oil Price Dynamics
On Monday, Brent crude prices jumped nearly 2% to $70 per barrel following the OPEC+ announcement to raise production volumes. As of Friday, prices were close to $69. The IEA also noted that refining margins and strong demand indicate the market may be experiencing greater strain than suggested by official data.
Future Oil Demand Expectations
With August approaching, the IEA expects oil demand to rise, particularly in the Northern Hemisphere where activity increases with the onset of the vacation season. An increase in refinery throughput is anticipated at about 900,000 barrels per day for electricity generation. Despite these figures, the projected demand growth for 2023 is the lowest since the pandemic slump in 2020.
Thus, despite the rising supply forecast, the actual market conditions may indicate more serious challenges than initially expected, driven by increasing demand and changing price dynamics.
