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A week-long rally in crude oil, driven by a supply shortfall, eased on Tuesday as the west’s energy watchdog forecast that global inventories would grow next year.
The International Energy Agency predicted that growth in demand for crude would soften as the summer US driving season ended in coming weeks, and be further covered when planned production increases hit the market later this year.
The cautious report helped cool crude prices after what the IEA described as “Olympic levels of volatility” in the past month.
Brent crude slipped 0.6 per cent to $81.78, having risen more than 7 per cent since the start of August, when it was caught up in broader market fears that the US was heading for a recession. WTI, the US equivalent that has also rallied, was also down 0.6 per cent, at $79.60.
The IEA’s monthly report showed that demand in the US helped push consumption growth to 870,000 barrels a day in the second quarter, countering a slowdown in China.
The IEA expects growth in demand to be covered by supply increases of about 1.5mn b/d this year and 2025 from countries not in the Opec oil producers’ cartel, such as the US, Guyana, Canada and Brazil.
The predictions stand even if some Opec+ members extend the voluntary production cuts that have supported the price of crude for more than a year. The cuts, led by Saudi Arabia and Russia, are due to unwind from the fourth quarter.
“Despite the marked slowdown in Chinese oil demand growth, Opec+ has yet to call time on its plan to gradually unwind voluntary production cuts starting in the fourth quarter,” said the IEA, which is primarily funded by members of the OECD.
The agency added that current balances suggested that even if the Opec+ cuts remained in place, global inventories could grow by an average 860,000 b/d in 2025 as other producers kept pumping oil, which would “more than cover expected demand growth”.
For the year, the IEA expects global demand to increase by just under 1mn b/d, less than the 2.1mn b/d estimate of Opec, and to grow by a similar level in 2025.
Oil prices have been struggling to break through their ranges this year, with crude averaging about $83 a barrel, as forecasts of weakening demand were countered by tensions in the Middle East and production cuts.
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