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OPEC may soon lose its sway over global oil prices, IEA says

London CNN  —  A looming glut in global oil supply could “upend” attempts by the Organization of the Petroleum Exporting Countries and its allies, or OPEC+, to prop up prices by cutting production, according to the International Energy Agency. The Paris-based IEA said Wednesday that it expects growth in global oil production — led by the United States and other countries in the Americas — to “inflate the world’s spare (oil) capacity cushion” to levels seen only once before, during the coronavirus pandemic when oil prices crashed. By 2030, global oil supply will outstrip demand by a “staggering” 8 million barrels per day, according to forecasts published by the agency in its medium-term oil market report. “(That’s) a major, major surplus and… might be one of the highest in the history,” Fatih Birol, the IEA’s executive director, told reporters. A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia June 4, 2023. REUTERS/Alexander Manzyuk Alexander Manzyuk/Reuters Related article OPEC+ extends oil output cuts into 2025 That surplus “could upend the current OPEC+ market management strategy aimed at supporting prices,” the agency said in its report, adding that the glut could result in a “lower-price environment.” OPEC, which has allied itself with Russia and other producers, did not immediately respond to a CNN request for comment. The IEA also forecast growth in global oil demand to “slow progressively” over the rest of the decade, with demand peaking by 2029 before contracting slightly the year after. The agency said the accelerating deployment of clean energy technologies, including “surging EV sales,” would be one of the main reasons for the slower growth in oil demand. Unwinding output cuts OPEC+ has been restraining output for about two years in a bid to prevent the emergence of a huge supply surplus that could depress prices and hurt the oil-dependent economies of its member states. Its production cuts amount to about 5.7% of global crude supply. Earlier this month, the group agreed to extend those deep reductions in crude oil output into 2025, but also said it would start to gradually unwind some of the cuts from October 1. Despite the cuts, oil prices have trended downward in recent months. The price of Brent crude, the global oil benchmark, has tumbled almost 9% since hitting a five-month high in early April, to trade at $83 per barrel Wednesday. It stood at $91 in early April when a suspected Israeli airstrike on Iran’s embassy in Syria sent jitters through oil markets. The price of West Texas Intermediate crude, the US benchmark, has also fallen 9% to trade at $79 a barrel Wednesday. It is down from nearly $87 per barrel in early April. Subdued oil prices have partly been the result of record US oil output, which has bumped up global supply, and concerns about sluggish demand in China — the world’s biggest importer of oil —  as well as in other major economies.