By Ahmad Ghaddar
LONDON, Oct 14 (Reuters) – The world’s surplus oil production capacity, which helps to moderate market swings, will fall in late 2022 as OPEC + producers increase their pumping, highlighting the need investment to meet growing demand for crude oil, the International Energy Agency (IEA) said on Thursday.
The IEA said in its monthly oil market report that OPEC + surplus capacity could fall to less than 4 million barrels per day (bpd) in the fourth quarter of 2022 from 9 million bpd in the first quarter of 2021. It forecast global demand at 99.6 million bpd in 2022, slightly above pre-pandemic levels.
Excess capacity is an important cushion for the oil market, as it allows producers to respond quickly to unscheduled shutdowns that can reduce supply in the market and cause sharp price fluctuations.
The spare capacity will be concentrated in Middle Eastern producers such as Saudi Arabia, the United Arab Emirates, Iraq and Kuwait, the IEA said, while Russia will pump to the top in the fourth quarter of 2022, with a capacity of 10.45 million bpd.
“The reduction in global surplus capacity underscores the need for increased investment to meet future demand,” he said, after demand fell during the pandemic, prompting many producers to delay or scrap plans to increase their capacity. .
The IEA defines spare capacity as production that can be used within 90 days and maintained for an extended period.
Others use different definitions. The US Energy Information Administration forecasts that OPEC surplus capacity will be 5.11 million bpd in the fourth quarter of 2022, based on production that can start in 30 days and continue for at least 90 days. .
Excess capacity becomes increasingly important as crude inventories shrink, as OPEC + continues to cut its production.