Unpredictable energy markets soften global economic outlook

Volatility in global energy markets has business and government economists wondering what to expect from supply and demand for the remainder of the year and beyond.

The Energy Information Administration (EIA) at the US Department of Energy released its July Short-Term Energy Outlook this week. In the first paragraph it noted the report “is subject to heightened uncertainty” about energy supplies from Russia, the US, and OPEC.

Also, the International Energy Agency (IEA) stated in its report this week: “Rarely has the outlook for oil markets been more uncertain. A worsening macroeconomic outlook and fears of recession are weighing on market sentiment, while there are ongoing risks on the supply side.”

Higher prices and a deteriorating economic environment have started to take their toll on oil demand, but strong power generation use and a recovery in China are providing a partial offset, IEA stated. Still, IEA projects demand an increase of 1.7 million barrels per day (b/d) in 2022, reaching 99.2 million b/d.

“World oil supply jumped by 690,000 b/d to 99.5 million b/d in June as resilient Russian production and higher output from the US and Canada more than offset steep maintenance-related losses from Kazakhstan,” according to IEA. “Production is expected to rise by 1.8 million b/d by end-year to reach 101.3 million b/d. Global oil supply is set to average 100.1 million b/d in 2022 before hitting an annual record of 101.1 million b/d in 2023.”

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