Oil prices fell in early trade on Tuesday after the International Energy Agency (IEA) warned that the worst of the energy crisis is yet to come.
IEA executive director Fatih Birol said countries were experiencing the first global energy crisis, warning "We might not have seen the worst of it yet".
It comes as US president Joe Biden intensified efforts to lobby the Organisation of Petroleum Exporting Countries and its allies, of which Russia is a member, to pump out more oil in an effort to tame surging energy prices.
Only two cartel members, Saudi Arabia and the United Arab Emirates, have the spare capacity to offset the potential market shortfall. The UAE previously encouraged the cartel to release more supply to calm prices and relieve fuel costs.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Joe Biden’s trip to Saudi Arabia to reset ties with the Kingdom, comes amid pleas to Gulf States to pump more oil to bring stability to the oil markets.
"However higher oil prices have boosted Gulf economies, with Saudi Arabia’s GDP surging by 9.9% in the first quarter. So there is likely to still be reticence about turning on the taps too freely, particularly given the country is already believed to be operating near the limits of its capacity.’’
Experts have warned that oil prices are "still a third higher' compared to the start of the year as the sanctions squeeze limits Russian oil purchases, heightening supply concerns.
"Although deteriorating growth in economies would be a downwards force on the oil price, fresh attempts to limit Russia’s financial power, by imposing a price cap on its crude exports, could distort markets further adding to volatility," Streeter added.
In June, Shell CEO Ben van Beurden warned that the world faces an “ever-tighter market” and a “turbulent period” because OPEC has less spare capacity than assumed.
In its monthly report, OPEC provided to relief for the crude market. It has forecast that world oil demand will tick up in 2023, but at a slightly slower rate than this year — if there is no escalation in Russia's war in Ukraine.
It expects consumption to be supported as countries get better at containing the spread of COVID infections and still-robust global economic growth.
OPEC said demand will rise by 2.7 million barrels per day in next year. This year's growth forecast was left unchanged at 3.36 million bpd.
"In 2023 expectations for healthy global economic growth amidst improvements in geopolitical developments, combined with expected improvements in the containment of COVID-19 in China, are expected to boost consumption of oil," OPEC said on Tuesday.
Meanwhile, rising coronavirus infections in China and surging inflation have stoked fears about a global economic slowdown, while a rising dollar has also made oil less attractive to investors.
Chinese authorities announced that commercial and industrial businesses in Macao will be closed for a week in an effort to contain the spread of COVID-19, hitting casino stocks in particular.
The region has recorded about 1,500 coronavirus infections since mid-June, with around 19,000 people in mandatory quarantine, according to government figures.
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