IEA: Oil production “freezes” while demand skyrockets
The International Energy Agency (IEA) believes that oil prices will remain volatile until relevant parties reach an agreement on increasing production.
The International Energy Agency (IEA) on July 13 said oil demand spiked in June. But the fact that the countries of the Organization of the Petroleum Exporting Countries and its partners (OPEC+) did not raise their output accordingly. causing oil prices to fluctuate strongly until the parties reach an agreement on increasing production.
At a meeting earlier this month, representatives of OPEC + countries were unable to reach agreement on a plan to relax production cuts, which were applied to prevent the decline in oil prices at the beginning of the outbreak. COVID-19 pandemic. However, demand increased sharply, with 3.2 million bpd in June according to the IAE’s assessment, which is one third higher than last year’s low.
The IEA sees demand likely to increase to 3.3 million bpd for the entire third quarter of this year. This consumption will double compared to the same period in 2019 after adjusting for seasonal data. The main reason comes from the fact that many countries have loosened restrictions and distanced from COVID-19, the vaccination strategy has made progress.
OPEC+ has repeatedly planned to gradually increase production, but the current standoff means that total output will freeze at current levels until the parties reach a final agreement.
“Oil prices reacted very quickly to the OPEC+ disagreement at last week’s meeting, leading to the risk of a supply deficit if there is no consensus to increase production,” the IEA’s latest monthly report said.
The majority of futures contracts are currently trading at $75 per barrel. Many analysts do not exclude oil prices will reach the threshold of $ 100 / barrel. But there is also another scenario: If OPEC+ reaches an agreement to increase production, member countries expand exports and seek to gain market share, which will most likely lead to a crash in oil prices.