The International Energy Agency said Tuesday that oil supplies were catching up with demand, potentially easing upward pressure on prices. The agency, which is based in Paris, said that the oil market remained “tight by all measures but that a reprieve from the price rally could be on the horizon.”
A drop in oil prices would come as a relief to consumers, who have seen prices at the pump surge by nearly 50% over the past year. Home heating bills are also on track to be the highest in years. Higher energy prices ripple through the economy, raising the cost of manufacturing and shipping all kinds of goods, and ultimately driving up prices for consumers.
Still, oil supply constraints are only one of an array of factors that have pushed inflation to its highest level in decades. Pandemic-driven shifts in work and spending have led to supply-chain bottlenecks, labor shortages and other issues around the world, pushing up prices for many items. Many economists, including policymakers at the Federal Reserve, expect those forces to recede along with the pandemic, but that will take time.
The International Energy Agency reported that global production increased by a hefty 1.4 million barrels per day in October, or more than 1% of supplies, and that it expected an additional 1.5 million barrels a day to come on the market over November and December.
The report said growth in demand was strengthening as countries including the United States opened their borders for international travel, spurring consumption of jet fuel, which has so far lagged other petroleum products.
The forecast could also lend support to the arguments of the oil producers’ group known as OPEC+, which in recent meetings has shrugged off requests from the Biden administration to accelerate production increases.
OPEC+, which is led by Saudi Arabia and Russia, agreed in July to raise output by a modest 400,000 barrels per day each month. OPEC+ has expressed concern that bigger increases could result in supplies outstripping demand next year, potentially causing prices to plummet.
The group has also argued that although oil prices may have risen sharply this year — currently about $82 a barrel for Brent crude, the international benchmark, and $81 per barrel for West Texas Intermediate, the U.S. standard — the increases have been modest compared with the rocketing prices of other energy, including natural gas and electric power.