Lower demand and larger-than-expected supplies from Russia are helping ease tensions, according to the International Energy Agency.
Brent oil chart at 4 hour intervals
The worst oil supply crisis in decades is showing first signs of easing, the International Energy Agency said on Wednesday, as oil demand shrinks as economic growth slows, with anti-Russian sanctions putting less pressure on oil production than expected.
The Paris-based agency cut its forecasts for oil demand for this year and next. According to the monthly oil market report, the high price of oil tends to repel consumers, while the weakening of global economic growth, which in turn is driven by high inflation and central bank policies, is undermining demand.
US and Canadian producers led the way in terms of global production growth, and sanctions on the Russian oil industry had less of an impact on production than originally expected.
All this is already affecting the oil market. On Tuesday, the international benchmark Brent fell 7.1% to $99.49 a barrel, approaching the lowest level since the start of the conflict in Ukraine in February. At the time of publication, a barrel of Brent oil is selling at $97.27.
Oil has risen sharply this year, jumping to almost $130 a barrel just after the start of the CBO in Ukraine. Major oil producers are in no hurry to increase production at the same pace as recovering global demand. Western sanctions on Russia have cut off millions of barrels of oil supplies from one of the world’s largest oil exporters, though the country has found alternative buyers in China and India.