The International Energy Agency on Oct. 13 strongly criticized the OPEC+ group’s oil output cuts as it slashed its demand growth estimates for 2022 and 2023 on the worsening economic outlook, China’s pandemic restrictions and price rises induced by the cuts.

In its monthly oil market report, the IEA warned the world was navigating the “worst global energy crisis in history” and said the OPEC+ output cut announced Oct. 5 “increases energy security risks worldwide.”

It warned oil price rises stemming partly from the output cuts could prove a “tipping point” for the global economy.

On the back of economic pressures, rising prices and China’s COVID-19 restrictions, it cut its 2022 growth estimate by 60,000 b/d to 1.9 million b/d and its 2023 growth estimate by 470,000 b/d to 1.7 million b/d.

It forecast a 340,000 b/d contraction in demand in the fourth quarter 2022 compared with year-earlier levels followed by slight year-on-year growth in Q1 2023.

It highlighted “the relentless deterioration of the economy and higher prices sparked by an OPEC+ plan to cut supply.”

“Disruptive market forces are multiplying as the world struggles to navigate the worst global energy crisis in history. The OPEC+ bloc’s plan to sharply curtail oil supplies to the market has derailed the growth trajectory of oil supply through the remainder of this year and next, with the resulting higher price levels exacerbating market volatility and heightening energy security concerns,” the IEA said.

It added that the OPEC+ cuts, even taking into account lower demand, would limit a much-needed build in oil stocks through the first half of 2023.

OECD commercial stocks at the end of August were 243 million barrels below the five-year average at 2.74 billion barrels, it estimated.
Source: Reuters