LONDON - A decision by the Opec+ oil producer group last week to rein in output has driven up prices and could push the global economy into recession, the International Energy Agency said on Thursday.
“The relentless deterioration of the economy and higher prices sparked by an Opec+ plan to cut supply are slowing world oil demand,” said the Paris-based agency, which includes the United States and other top consumer countries.
“With unrelenting inflationary pressures and interest rate hikes taking their toll, higher oil prices may prove the tipping point for a global economy already on the brink of recession,” it added in its monthly oil report.
It is an unusually strong rebuke from the IEA, which slashed forecasts for global oil demand growth for 2023 by 470,000 barrels a day – or roughly 20 per cent.
Crude futures briefly surged last week when Saudi Arabia and its partners announced a substantial two million barrel-a-day output cut, ignoring entreaties from consumers such as the US. Prices have since subsided a little but remain above US$90 a barrel in London.
US President Joe Biden fiercely criticised Riyadh’s move, accusing the kingdom of aiding fellow producer Russia as it wages war on Ukraine. He said he would re-evaluate America’s decades-long diplomatic relationship with the Saudis.
The Opec+ decision “will sharply reduce a much-needed build in oil stocks through the rest of 2022 and into the first half of 2023,” the IEA said. Inventories in developed nations are a “steep” 243 million barrels below their five-year average.
Saudi Arabia and others in the 23-nation alliance have countered that the supply curbs were necessary in the face of extreme economic uncertainty. The International Monetary Fund warned on Tuesday that the worst of the current turmoil “is yet to come”.
Global oil consumption will increase in 2023 by 1.7 million barrels a day, down from a forecast of 2.1 million in September’s report, the IEA said. This year, demand will expand by 1.9 million barrels a day to average 99.6 million a day.
The Organisation of Petroleum Exporting Countries and its partners will likely implement only half of their advertised two million barrel cut, because production in most member countries is already far below their assigned targets, the IEA said.
Still, global supplies may take a further hit in the months ahead as the European Union enacts a ban on Russian oil imports, the agency predicted. The country’s oil exports fell by 230,000 barrels a day to 7.5 million a day in September, according to the IEA’s estimates. BLOOMBERG, REUTERS