Chronic oil supply issues among a group of major producing nations threaten to heighten tightness and volatility in the energy market and push prices higher still, the International Energy Agency said Friday.
Failures by members of the Organization of the Petroleum Exporting Countries and their allies to meet pledges to raise supply have helped propel oil prices to their highest level since 2014, the Paris-based agency said in its monthly market report. There were signs that the shortfall was worsening, likely exacerbating tightness in an already stretched market, the IEA said.
The cartel, led by major producer Saudi Arabia, and an allied group of producers including Russia, have been increasing their supply in small, steady increments, part of efforts to chase robust increases in oil demand and drawdown stockpiles that built during the height of the Covid-19 pandemic.
The alliance, known collectively as OPEC+, has come under increasing pressure from oil-consuming countries to step up efforts to hike supply, as demand has proved stronger than expected and some members of the cartel have been unable to meet their targets due to aging oil infrastructure following years of underinvestment.
At their latest meeting last week, the alliance, known collectively as OPEC+, said they would stick to their moderate, planned increases in output of 400,000 barrels a day in March.
“Chronic underperformance by OPEC+ in meeting its output targets and rising geopolitical tensions have propelled oil prices higher,” the IEA said in its report. “If the persistent gap between OPEC+ output and its target levels continues, supply tensions will rise, increasing the likelihood of more volatility and upward pressure on prices.”
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