LONDON, July 13 (Reuters) – Stalled talks by major oil producers over releasing additional supply could escalate into a price war just as COVID-19 vaccines boost demand for oil, a said Tuesday the International Energy Agency (IEA).
The Paris-based agency’s concern over the scarcity of oil supplies comes less than two months after the publication of a landmark report warning that investors should not fund new oil, gas or coal projects if the world wants to achieve net zero emissions by mid-century. Read more
“The possibility of a market share battle, however remote, hangs over markets, as does the potential for high fuel prices to fuel inflation and harm a fragile economic recovery,” the IEA said.
“The OPEC + stalemate means that until a compromise can be reached, production quotas will remain at July levels. In this case, oil markets will tighten considerably as demand rebounds after the COVID-induced drop last year, “he added in his monthly oil market report. .
A row between Saudi Arabia and the United Arab Emirates has forced OPEC +, which includes producers from the Organization of the Petroleum Exporting Countries, Russia and others, to drop talks last week on the increased production after days of negotiations.
Although rising virus cases in some countries remain a major downside risk, the IEA said, oil storage levels in most developed countries have fallen well below historical averages and withdrawals from Oil inventories this fall are expected to be the largest in at least a decade.
“Oil markets are likely to remain volatile until OPEC + production policy is clear. And volatility does not help ensure orderly and secure energy transitions – nor is it in the best interests of consumers. producers or consumers, ”the IEA added.
The IEA said the market volatility fueled by the deadlock has served neither producers nor consumers and that while rising fuel prices could provide a boost to the development of more renewables, “the volatility does not help ensure orderly and safe energy transitions “.
Reporting by Noah Browning; edited by Jason Neely
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