Oil Markets Are Likely to Remain Volatile

The International Energy Agency warned that world Oil Markets are likely to remain volatile following a breakdown in talks between OPEC members and their non-OPEC allies, creating a no-win situation. The IEA said energy market participants were closely monitoring the prospect of a deepening supply deficit if a deal was not reached by the Organization of the Petroleum Exporting Countries and its oil-producing allies.The IEA said that the Oil Markets remain volatile until there is clarity on OPEC+ production policy.

The volatility does not help ensure orderly and secure energy transitions nor is it in the interest of either producers or consumers.OPEC abandoned talks last week that would have boosted oil supply.Most diplomats agreed to increase oil production by around 400,000 barrels per day in monthly installments from August until the remaining supply cuts were unwound. This was likely to extend supply cuts through to the end of 2022.

It means no agreement has been reached on a possible increase in crude production beyond the end of July, leaving Oil Markets in a state of limbo just as global fuel demand recovers from the ongoing coronavirus crisis.OPEC+, which is dominated by the Middle East crude producers, agreed to implement massive crude production cuts last year to support oil prices when the coronavirus pandemic coincided with a historic fuel demand shock.

The IEA said it expects global oil demand to rise by 5.4 million barrels per day this year and by a further 3 million barrels in 2022, largely unchanged from last month’s forecast. International benchmark Brent crude futures traded at $75.57 a barrel on Tuesday morning, up 0.5% for the session, while U.S. West Texas Intermediate futures stood at $74.51, around 0.6% higher.Oil prices rallied more than 45% in the first half of the year, supported by the rollout of Covid vaccines, a gradual easing of lockdown measures and record production cuts from OPEC+.