The oil market is facing a substantial supply deficit in the months ahead, the IEA said.
The global oil market is set to tighten through the end of the year as China drives record global demand and as Saudi Arabia and Russia extend their output cuts, according to the agency’s Oil Market Report for September.
The decision by Saudi Arabia and Russia to reduce production through December will drive a significant supply shortfall in the fourth quarter of this year. This could further push up prices, which breached $90 per barrel in August for the first time in 10 months, adding to the inflationary pressures that are plaguing economies around the world.
The growing strains in the oil market, a risk the IEA’s monthly report has been warning about since the start of the year, are visible in the sharp drop in global oil inventories. This comes as demand is on track to reach a record 101.8 million barrels per day in 2023, mostly due to resurgent Chinese consumption.
This month’s Oil Market Report comes 40 years after the very first edition appeared in September 1983. The complexity of the international oil market has evolved over the past four decades – but concerns about energy security remain as critical now as they were then.
Peaks in oil, gas and coal demand are in sight in the coming years, the IEA warns.
In an opinion article that made waves across the energy world, the IEA’s Executive Director revealed last week that based on today’s policy settings – and without any new climate or clean energy policies – demand for each of oil, natural gas and coal is set to peak this decade, a historic turning point.
In the article published by the Financial Times, Dr Birol wrote that the IEA’s flagship World Energy Outlook 2023, to be released next month, shows peaks in demand for each of the fossil fuels this decade for the first time – a moment with major implications for the global energy sector and the fight against climate change.
As a result of these remarkable shifts – driven by the spectacular growth of clean energy technologies such as solar panels and electric vehicles, structural shifts in China’s economy and the global energy crisis – the peak in greenhouse gas emissions is moving closer.
But Dr Birol emphasised that projected declines for oil, gas and coal are still nowhere near steep enough to limit global warming to 1.5 °C. Additionally, demand is set to vary considerably among regions, with growth in emerging and developing economies, notably for gas, partially offsetting the steep drops in advanced economies. And the overall declines are unlikely to be linear. Some investment in oil and gas will still be needed, he notes, while cautioning that increasing it brings both business risks and climate risks.
/The International Energy Agency/