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The oil price has developed solidly in recent months and is back at the level before the corona pandemic started. Thanks to continued restrictions on production in the OPEC + alliance and prospects for economic growth, North Sea oil has come well above $ 70 a barrel on several occasions.
But in its recent oil market report on Wednesday, the International Energy Agency (IEA) warns against over-optimism:
– The strong oil rally of close to 70 dollars per barrel has triggered talk of a new super-cycle and the threat of a supply deficit. Our data and analyzes suggest otherwise, the agency writes.
– Enough to spare
The oil stocks were filled to the brim when demand suffered a huge blow during the pandemic last year. And even though they are being emptied gradually, there is still “plenty” of oil there, the IEA points out.
In the short market analysis that this month has been entitled “Enough to spare,” the agency writes that stocks in the OECD countries are still at just over 3 billion barrels, 110 million barrels higher than a year ago when the covid-19 crisis started for seriously. That equates to over a month of worldwide consumption.
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In addition, there is a lot of unused production capacity that can return to the market. When OPEC +, led by Saudi Arabia and Russia, earlier this month decided to continue most of the production restrictions that have supported oil prices since last year, it came as a surprise and helped raise prices further. As of today, this group of producer countries is holding back eight million barrels per day, which is a significant volume compared to the worldwide offer of 91.6 million barrels per day in February.
OPEC + will meet again on 1 April to negotiate the measures for the month of May.
Market in recovery
Despite warnings that oil price inflation is currently limited, the IEA continues to paint a picture of a stabilizing market.
The agency expects that demand for oil will increase by 5.5 million barrels per day this year, slightly adjusted upwards from 5.4 million barrels in the previous report. This will cover approximately 60 per cent of the demand that was lost last year, and will lead to a demand of a total of 96.5 million barrels more per day for the year as a whole.
Most of the growth is still expected to come in the second half of the year, and demand is expected to increase by more than five million barrels per day from the first to the fourth quarter as vaccine programs pick up speed and the economy recovers.
– The outlook for stronger demand and continued ties in OPEC +’s production points to a sharp decline in oil inventories in the second half of the year. So far, however, there is more than enough oil in the tanks and underground to keep the global oil markets well supplied, the agency writes.
The IEA reiterates that it envisages that demand will return to pre-pandemic levels in 2023. (Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other form of use of all or part of the content, can only take place with written permission or as permitted by law. For additional terms look here.
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