The recent spike in oil should ease in the near term, according to the International Energy Agency’s (IEA) latest monthly report, but there could be a large supply gap late next year if the Organization of Petroleum Exporting Countries (OPEC), year as oil demand will grow steadily thanks to a solid global economy.
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The fact that the recent spike in oil prices should ease is a good thing, according to the Paris-based organization, given the concerns that surging oil prices could crimp global economic growth.
"Prices are unlikely to increase as sharply as they did from mid-2017 onwards and thus the dampening effect on demand will be reduced," the IEA said in its latest monthly report.
The agency is forecasting global oil demand will grow by 1.4 million barrels per day (bpd) in 2019 – topping 100 million bpd in the second quarter of the year.
Global economic health is important to future oil demand and while the agency sees a solid global economy they are cautions about continued higher oil prices and trade disruptions, both of which could dent global economic growth.
The agency sees a solid global economy, but is cautious. Its main concerns are higher oil prices and trade disruptions.
“There is the possibility of a downward revision to our economic assumptions in the next few months. The world economy is feeling some pain from higher oil prices,” the IEA commented in its latest market report, adding “Increasing trade tensions are the main risk to our oil demand forecast.”
In terms of supply, two big variables are Venezuela and Iran. Oil output for Venezuela has been crimped by the nation’s economic crisis while U.S. sanctions on Iran could further reduce that country’s output.
OPEC will meet on June 22-23 to discuss the potential of reducing its output cuts now that the market is more in balance.
President Donald Trump on Wednesday tweeted about oil prices, stating “Oil prices are too high, OPEC is at it again. Not good!”