The International Energy Agency (IEA) has lowered its oil demand forecasts. The emergence of the Delta variant of the coronavirus will weaken economic growth, especially in Asian countries. For example, new lockdowns have been introduced in China, Vietnam and Indonesia.
The forecast adjustment comes just as oil cartel OPEC and its allies (OPEC+) have agreed to increase production. This was done at the insistence of the IEA, among other things. Earlier this week, the United States called on OPEC+ countries to accelerate production to ensure that oil prices continue to rise.
According to the IEA’s new monthly report, the OPEC+ production increase comes just as demand levels off. Countries that are not part of that organization, such as the United States, also produce more oil. This production can increase even further through new investments.
In June, demand was 3.8 million barrels of oil per day but then slumped. However, the IEA expects demand in the second half of the year to reach 3.25 million barrels per day. By 2022, the IEA now expects an oil surplus if OPEC+ countries stick to their production easing.
The oil price has already fallen 6 percent this month. For example, a barrel of Brent oil now costs around 71 dollars per barrel, compared to almost 78 dollars at the beginning of July.