An assurance from the International Energy Agency (IEA) that the crude oil market is tighter than expected pushed prices higher by over 2 per cent on Friday, with Brent specifically rising by $1.72 or 2.5 per cent to $70.36 a barrel and the US West Texas Intermediate (WTI) growing by $1.88 or 2.8 per cent to $68.45 a barrel.
The IEA disclosed that the world oil market may be tighter than it appears despite a supply and demand balance pointing to a surplus.
The agency, which advises industrialised countries, expects global supply to rise by 2.1 million barrels per day this year, up 300,000 barrels per day from the previous forecast. World demand will rise by just 700,000 barrels per day, it said, implying a sizeable surplus.
The Paris-based organisation said rising refinery processing rates to meet summer travel and power-generation demand were tightening the market and the latest, accelerated supply hike from the Organisation of the Petroleum Exporting Countries (OPEC+) had not had much effect.
Oil demand typically rises in the Northern Hemisphere summer as people fly and drive more on holidays. Given rising seasonal demand, refinery crude processing rates will increase by 3.7 million barrels per day from May to August to meet Northern Hemisphere travel demand, the IEA said.
Further adding support to the short-term price outlook, Russian Deputy Prime Minister Alexander Novak said Russia will compensate for overproduction against its OPEC+ quota this year in the August-September period.
Another sign of robust short-term demand was the prospect of Saudi Arabia shipping about 51 million barrels of crude oil in August to China, the biggest such shipment in more than two years.
On a longer-term basis, however, OPEC cut its forecasts for global oil demand in the 2026-2029 period because of slowing Chinese demand in its 2025 World Oil Outlook.
President Donald Trump has expressed frustration with Russian President Vladimir Putin due to the lack of progress in ending the war in Ukraine and Russia’s intensifying bombardment of Ukrainian cities.
The European Commission is set to propose a floating Russian oil price cap this week as part of a new draft sanctions package, but Russia appears not be shaken by such challenges.