Oil prices are unlikely to mount a dramatic and sustained surge despite vaccines expected to boost demand later this year, the International Energy Agency (IEA) said on Wednesday, with the world still awash in oil.
“Oil’s sharp rally to near $70 a barrel has spurred talk of a new supercycle and a looming supply shortfall. Our data and analysis suggest otherwise,” the IEA said in its monthly report.
“For a start, oil inventories still look ample compared with historical levels despite a steady decline … On top of the stock cushion, a hefty amount of spare production capacity has built up as a result of OPEC+ supply curbs,” it said.
The Organization of the Petroleum Exporting Countries and its allies, a group dubbed OPEC+, largely kept limits on production this month, galvanizing the market and causing some investors to predict a supercycle – a large, multi-year price rise.
“The prospect of stronger demand and continued OPEC+ production restraint point to a sharp decline in inventories during the second half of the year,” the Paris-based energy watchdog said.
“For now, however, there is more than enough oil in tanks and under the ground to keep global oil markets adequately supplied.”