July 14, 2024


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The International Energy Agency says OPEC+ now controls barely half of the oil market

The International Energy Agency says OPEC+ now controls barely half of the oil market

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The Western energy watchdog said on Thursday that the OPEC+ group now controls barely half of global oil production, with demand growth slowing “significantly” and US production reaching new highs.

The IEA said recent production cuts to support oil prices had reduced OPEC+’s market share to just 51 percent, the lowest level since the creation of the expanded cartel in 2016.

Despite the production cuts, oil prices remain below $75 per barrel, compared to around $100 in September, with the International Energy Agency noting that “global oil demand growth will slow significantly” in the current quarter.

Citing macroeconomic factors such as rising interest rates and a “fading recovery from Covid-induced lows,” she said demand will be about 400,000 barrels per day lower this quarter than expected just last month.

The agency added that OPEC+’s influence on the market may decline further next year, because increases in production by non-member countries are expected to be sufficient to meet the full rise in global demand expectations for 2024.

She noted that record supplies from the United States and higher production from producers such as Guyana and Brazil would increase oil supplies by non-OPEC countries by 1.2 million barrels per day in 2024 – more than the demand growth forecast of 1.1 million barrels per day.

The cartel – which includes OPEC members as well as countries such as Russia, Mexico and Azerbaijan – has announced several rounds of supply cuts over the past 14 months. But its efforts to support prices above $80 a barrel have been hampered by the production of non-member countries.

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The International Energy Agency says the United States, which already produces 20 million barrels per day, will remain the main source of supply growth next year.

“The continued rise in production and slowing demand growth will complicate efforts by major producers to defend their market share and maintain high oil prices,” the IEA said.

The International Energy Agency now expects oil demand growth to decline from an annual rate of 2.8 million barrels per day in the third quarter of 2023 to 1.9 million barrels per day in this quarter.

It had previously expected that demand growth this quarter would reach 2.3 million barrels per day.

More than half of this adjustment is due to weak demand in Europe, “as unprecedented interest rate hikes in 2022-2023 make their way through an already sluggish manufacturing sector,” the agency added.

The agency also expects weak demand in the Middle East and Russia, an indication of the widening scope of the economic slowdown.

But it expects global oil demand to rise by 130,000 barrels per day more than previously expected in 2024, adding that a “soft landing” in the United States is “beginning to emerge.”

In such a scenario, the US Federal Reserve will succeed in returning inflation to the target level of 2 percent without pushing the world’s largest economy into recession.