The International Energy Agency said on Tuesday that oil supplies are catching up with demand, potentially easing upward pressure on prices. The Paris-based agency said the oil market remains “tight on all counts, but a respite from rising prices may be on the horizon.”
The drop in oil prices will be a relief for consumers, who have seen pump prices rise by almost 50% over the past year. Home heating bills are also set to be the highest in years. Higher energy prices affect the economy, increasing the cost of producing and shipping all types of goods and ultimately driving up prices for consumers.
However, oil supply constraints are just one of many factors that have driven inflation to its highest level in decades. Changes in work and costs caused by the pandemic have led to supply chain bottlenecks, labor shortages and other problems around the world, resulting in higher prices for many goods. Many economists, including politicians at the Federal Reserve, expect these forces to weaken with the pandemic, but this will take time.
The International Energy Agency said that global production increased by a whopping 1.4 million barrels per day in October, or more than 1% of supply, and that an additional 1.5 million barrels per day are expected to enter the market in November and December. day.
The report says the growth in demand is picking up as countries, including the US, open their borders to international travel, spurring consumption of jet fuel, which has so far lagged behind other petroleum products.
The outlook could also bolster the arguments of a group of oil producers known as OPEC +, which in recent meetings rejected requests from the Biden administration to accelerate production growth.
OPEC +, led by Saudi Arabia and Russia, agreed in July to increase production by a modest 400,000 barrels per day each month. OPEC + expressed concern that larger growth could lead to supplies outstripping demand next year, which could cause prices to plummet.
The group also argued that while oil prices may have risen sharply this year – currently around $ 82 a barrel for Brent, the international benchmark, and $ 81 a barrel for West Texas Intermediate, the US standard – the rise has been modest compared to the rise in prices for other types of energy, including natural gas and electricity.