IEA cuts global oil demand forecast, warns of supply shock

oil barrels

Russia’s invasion of Ukraine and resulting sanctions against Moscow threaten to create a supply shock that will squeeze the global economy and cause a crude market deficit if major producers do not step in to boost production, the International Energy Agency (IEA) said in its monthly report.

The Paris-based organization said that the energy market is facing the largest supply crisis in decades and it may lead to permanent changes.

While only a few countries, including the United States, banned oil imports from Russia, but trading houses, oil firms and shipping companies are avoiding doing business with Russia, the report noted.

“For now, we see the potential for a shut-in of 3 million barrels per day (bpd) of Russian oil supply starting from April,” the IEA said.

The agency lowered its forecast for the growth of global oil supply for this year by about 2 million bpd to 99.5 million bpd, based on the decisions of the major producers of the Organization of the Petroleum Exporting Countries (OPEC).

The report warned that the increase in energy prices may push up inflation and reduce household purchases. It may also push central banks around the world to take decisions regarding these developments, which may cause very negative repercussions for growth.

The agency also lowered its forecast for global oil demand growth for this year by 950,000 bpd, as it expects demand to grow by 2.1 million bpd to 99.7 million bpd.