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Oil supercycle unlikely due to ample stocks and supply, says IEA

The IEA says oil’s sharp rally to near US$70 a barrel has spurred talk of a new supercycle and a looming supply shortfall.

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.

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“Oil’s sharp rally to near US$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.

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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.

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“For now, however, there is more than enough oil in tanks and under the ground to keep global oil markets adequately supplied.”

Source: Asaaseradio

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