IEA says oil market walking tightrope due to supply risks

The International Energy Agency said on Wednesday that the global oil market was walking a “tightrope” between a supply shortage and a possible economic recession, with demand already affected by higher prices and deteriorating economic conditions.

Rarely has the outlook for oil markets been more uncertain. A worsening macroeconomic outlook and fears of recession are weighing on market sentiment, while there are ongoing risks on the supply side,” the Paris-based agency said.

“For now, weaker-than-expected oil demand growth in advanced economies and resilient Russian supply” has reduced market tightness, the IEA said in its monthly oil report.

Still, its demand outlook for 2022 was trimmed by just 200,000 barrels per day (bpd) and is set for an annual rise of 1.7 million bpd and 2.1 million bpd in 2023, when it will reach 101.3 million bpd led by growth in developing countries.

The agency warned that OPEC members Saudi Arabia and the United Arab Emirates will have limited ability to pump more oil as their combined spare production capacity is expected to drop to just 2.2 million barrels per day in August.

On the other hand, despite the fact that Russian oil exports reached their lowest levels since last August, the agency said that Russian export revenues rose by $700 million on a monthly basis with the rise in oil prices.