Crude oil prices, which have soared in recent times, may soon begin to decline. Should this occur, petrol and diesel prices within the country could also fall. According to a recent report from the International Energy Agency (IEA), a surplus in global crude oil supply over demand could emerge in the last quarter of the year. As a result, the probability of global crude oil prices softening is expected to rise further.
In its latest assessment, the International Energy Agency indicated that the period from October to December may see global crude oil supply average 105 million barrels per day, while demand is projected to reach only 1.7 million barrels per day. The agency had previously anticipated that supply would not be able to meet demand in the fourth quarter. Yet, with oil-producing nations steadily increasing their output, the IEA now expects an excess in supply. For the first time since the Iran war, the agency notes, crude oil supply is set to outpace demand.
Gulf countries are once again ramping up their oil exports
Following the Iran war, a reduction in oil production was observed among Gulf nations, but their output is now returning to the levels seen before the conflict. When the war involving America and Israel began in late February, exports from these countries dropped sharply. However, Gulf producers are now employing alternative strategies to raise their output. The Energy Agency reports that a new method has been adopted by these countries to ship their tankers through the Strait of Hormuz. By switching off their tracking systems when transiting Hormuz, a tactic known as dark crossing technology, they are able to reduce the risk of attacks.
OPEC’s production increase
In October, OPEC+, the largest coalition of oil-producing countries, boosted its crude oil production to 41.2 million barrels per day. This represents an increase of 2.04 million barrels from September and brings production back up to 97 percent of pre-war figures. The IEA further mentioned that by the close of February next year, member states will supply 71 million barrels of oil, which will include 15 million barrels of diesel. With higher diesel availability, retail prices are expected to face less upward pressure.
A global decline in demand persists
At present, the International Energy Agency highlights that crude oil remains highly priced internationally, contributing to a worldwide drop in demand. As a consequence, daily oil demand has decreased by 2.7 million barrels. The situation is expected to improve by 2027, when demand could rise by approximately 2 million barrels. Besides OPEC Plus members, nations such as the United States, Canada, Brazil, Argentina and Guyana have also raised their oil production by about 1.6 million barrels per day. With these increases, crude oil supply is forecasted to reach 108.1 million barrels per day next year. This anticipated growth in supply is likely to stabilise the market and help moderate oil prices.