This is no time for the world’s oil producers to start adding supplies to the global market if they want to drain a glut that built up because of Covid-19.
That’s the conclusion that comes out of the latest monthly forecasts published by the world’s three major oil agencies — the International Energy Agency, the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries — if producers hope to get global inventories back to pre-pandemic levels by the end of the year.
Mindful of risks to oil demand, Saudi Arabia this month stunned oil traders by making unilateral cuts to its crude production of 1 million barrels a day. The move was at odds with most other nations participating in an OPEC+ pact to manage oil supplies, who either kept output stable or even increased it slightly. The alliance will meet again in early March to decide on their next steps.
The three agencies’ outlooks offer a degree of validation for Saudi Arabia’s stance. Of the trio, only OPEC raised its forecast of global oil demand this year, and then by a tiny 20,000 barrels a day, or roughly 0.02% of consumption. A surge in new coronavirus cases, driven by the emergence of more contagious variants, has led many countries to re-impose movement restrictions that are so detrimental to transport fuel usage. Cases are starting to rise again in Asia, the region that had been driving a recovery in global oil demand at the end of 2020.
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