By Adedapo Adesanya
Prices of crude oil jumped more than one per cent on Tuesday after the International Energy Agency (IEA) said the market should expect tighter supply.
In its monthly report, the Paris-based agency revealed that the market’s supply chain will tighten in the near time due to disagreements among major producers over how much additional crude to ship worldwide.
Prices would be volatile until differences were resolved among members of the Organization of the Petroleum Exporting Countries and other oil producers, it said.
“The OPEC+ stalemate means that until a compromise can be reached, production quotas will remain at July’s levels. In that case, oil markets will tighten significantly as demand rebounds from last year’s COVID-induced plunge,” an IEA report said.
When this information hit the market, it pushed the price of the Brent crude higher by $1.33 or 1.8 per cent to $76.49 per barrel and lifted the West Texas Intermediate (WTI) crude by $1.15 or 1.6 per cent to $75.25 per barrel.
Business Post reports that OPEC+ had been slowly unwinding record output curbs agreed on last year to cope with the pandemic.
However, at a meeting earlier this month, a dispute over policy between Saudi Arabia and the United Arab Emirates (UAE) meant plans to pump more oil by the end of 2021 were put on hold.
In its current form, this month’s OPEC+ production quota would get rolled into the next month unchanged, leaving markets even tighter than originally expected.
It was reiterated in the report that the overhang in global oil stocks built up last year has already been worked off, adding that preliminary data for the third quarter of the year suggests that there could be the largest crude oil stock draw in at least a decade.
It warned that there was the possibility of a market share battle by producers as the group could even abandon their pact, prompting them to open the taps.
This could see the hard work of trying to balance the market over the last two years wasted.
Rising coronavirus cases in some countries remained a key economic downside risk. France, the Netherlands and Spain announced new restrictions on Monday in a bid to curb surging cases of the highly transmissible Delta variant.
In the United Kingdom, the government in its bid to start living with the virus will lift its final phase of COVID-19 restrictions on July 19, despite rising cases.
In addition, the market may face new pressure as data showed that China’s first-half crude imports dropped.
China’s crude imports dropped by 3 per cent in the first half of the year for the first time since 2013, Due to the shortages in import quota, refinery maintenance, and rising global prices curbed buying.
Dipo Olowookere