By Adedapo Adesanya
The Brent crude grade rose by about 2.29 per cent or $2.12 to $94.57 per barrel on Thursday as the International Energy Agency (IEA) cut its oil demand forecast and warned that tight supply would affect the global economy.
Also, the United West Texas Intermediate (WTI) crude grade appreciated by 2.1 per cent or $1.84 yesterday to sell for $89.11 per barrel after the IEA cut its oil-demand growth forecasts by 470,000 barrels a day for 2023 to 1.7 million barrels a day. It also lowered its 2022 oil-demand growth forecast by 60,000 barrels a day to 1.9 million barrels per day.
Oil demand growth has steadily fallen throughout the year and is predicted to shrink in the fourth quarter by 340,000 barrels a day, the IEA said.
“With unrelenting inflationary pressures and interest rate hikes taking their toll, higher oil prices may prove the tipping point for a global economy already on the brink of recession,” the IEA said in its monthly market report.
The group buttressed that an oil supply cut from the Organisation of the Petroleum Exporting Countries and allies (OPEC+) threatens to deepen a global energy crisis by sending oil prices higher at a time of already elevated inflation and weak economic growth.
Last week’s two million barrel-a-day reduction in the group’s output targets will tighten the oil market further at a moment of extreme vulnerability with few additional sources of supply available to compensate, the Paris-based agency said Thursday.
The cut’s impact will exacerbate a mix of high oil prices and weakening global growth, which would undermine longer-term demand for oil, the IEA said, as it slashed its oil-demand forecasts.
OPEC has said higher oil prices are necessary to spur fresh investments in oil production, but the IEA said constraints among oil producers meant additional supplies would be scant.
The cut also comes ahead of an EU embargo on Russian oil and a plan by the Group of Seven wealthy nations to cap oil prices, both of which analysts warn could further undermine global energy supplies.
Russia has said it would cut production and withhold supplies from nations participating in the price cap mechanism. Meanwhile, time was running out for EU states to find alternative sources of energy to compensate for the still-high levels of oil currently imported from Russia, the IEA said.
Prices also moved higher despite the Energy Information Administration (EIA) reporting a crude oil inventory build of 9.9 million barrels for the week of October 7, but the move lower didn’t last long.
At 439.1 million barrels, US crude oil inventories are 1 per cent below the five-year average for this time of the year. A week earlier, inventories recorded a draw of 1.4 million barrels.
Dipo Olowookere