Crude oil rally stalls after IEA forecasts oil glut

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A week-long rally in crude fueled by a supply shortage eased on Tuesday as the western energy watchdog forecast global stockpiles would rise next year.

The International Energy Agency predicted that growth in crude oil demand will moderate as the US summer season ends in the coming weeks and will be further cushioned when planned production increases hit the market later this year.

The cautious report helped cool crude oil prices after what the IEA described as “Olympic levels of volatility” over the past month.

Brent crude fell 0.6 percent to $81.78, after rising more than 7 percent since early August, when it was caught up in broader market fears that the U.S. was headed for a recession . WTI, the U.S. equivalent that also rose, was down 0.6 percent at $79.60.

The IEA’s monthly report showed that US demand helped lift consumption to 870,000 barrels per day in the second quarter, offsetting a slowdown in China.

The IEA expects the increase in demand to be covered by supply increases of around 1.5 million b/d this year and 2025 from non-OPEC countries such as the US, Guyana, Canada and Brazil .

The forecasts come even as some OPEC+ members extend voluntary production cuts that have supported crude prices for more than a year. The cuts, led by Saudi Arabia and Russia, are set to taper off from the fourth quarter.

“Despite a significant slowdown in China’s oil demand growth, OPEC+ has yet to call time on its plan to phase out voluntary production cuts starting in the fourth quarter,” said the IEA, which is mainly funded by OECD members.

The agency added that current balances suggest that even if OPEC+ cuts remain in place, global inventories could rise by an average of 860,000 bpd in 2025 as other producers continue to pump oil, which would “cover more more than the expected increase in demand”.

For this year, the IEA expects global demand to grow by just under 1mn b/d, less than OPEC’s estimate of 2.1mn b/d, and to rise by a similar level in 2025.

Oil prices have struggled to break out of their ranges this year, with crude averaging around $83 a barrel, as forecasts of weaker demand were countered by tensions in the Middle East and production cuts.