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The oil market has been on edge for a week now, considering the possibility of a new price war within the OPEC + alliance, the International Energy Agency (IEA) said on Tuesday, adding that the stalemate current also threatens to derail the global economic recovery. .
In June, global oil demand is estimated to jump from 3.2 million barrels per day (bpd) to 96.8 million bpd, the agency said in its closely watched oil market report for July. .
For the remainder of the year, demand for oil will continue to rebound thanks to solid economic growth, rising vaccination rates and easing restrictions in many economies, the IEA said.
Still, the oil market is nervous due to the current OPEC + stalemate, with heightened volatility helping neither producers nor consumers, the agency noted.
“At the same time, the possibility of even a distant market share battle hangs over the markets, as does the potential of high fuel prices to fuel inflation and hamper a fragile economic recovery. Uncertainty about the potential global impact of the Covid-19 Delta variant in the coming months is also tempering sentiment, ”the IEA monthly report says.
The already week-long standoff means that until a compromise can be found, OPEC + will leave production quotas in August unchanged from July levels. This will surely tighten the market much more as global oil demand continues to rebound. Surplus oil stocks in developed economies are already below historical averages, and without OPEC + easing its production cuts, we could see a significantly tighter market with particularly tight crude oil balances, said. IEA.
Oil prices at current or higher levels could spur electrification, but high prices could also slow economic recovery, especially in large emerging markets, the Paris-based agency said.
Prices at the pump hit a seven-year high in the United States. They are also increasing across Europe and have reached historic highs in India, the world’s third-largest importer of crude oil, the IEA noted.
“Oil markets are likely to remain volatile until OPEC + production policy is clear. And volatility does not help ensure orderly and secure energy transitions – and neither is it in the best interest. producers or consumers, ”the agency said.
By Tsvetana Paraskova for OilUSD
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