The Paris-based International Energy Agency (IEA) has called for the OPEC+ group to begin pumping more oil in order to ensure the world’s energy demands are met as it recovers from the COVID-19 pandemic.
The IEA recently called for new investment in oil and gas projects to stop if the world is to meet the Paris Agreement’s commitment of keeping global warming well under a 2°C increase on pre-industrial levels. Its latest monthly report would seem to suggest the near-term market realities conflict with this, with oil still being needed for fuel and industrial products like transformer oil.
The organisation predicts that the demand for oil will increase by 5.4 million barrels a day (bpd) this year. Next year, it says it will increase again by 3.1 million bpd, to break the 100 million bpd threshold for the first time since 2019.
Many large oil companies like Exxon Mobil slashed their capital spending after the onset of the pandemic, but the IEA sees no issues in meeting the increased demand:
“Meeting the expected demand growth is unlikely to be a problem. Even after boosting oil production by around 2 mb/d over the May-July period, OPEC+ will have 6.9 mb/d of effective spare capacity. If sanctions on Iran are lifted, an additional 1.4 mb/d could be brought to market in relatively short order.”
The IEA expects the recovery in demand to be uneven in terms of both products and geography, with non-OECD countries’ recoveries potentially being at risk from slow vaccine deployment.