Members of the International Energy Agency (IEA) can tap into its oil reserves to alleviate any supply issues, the agency’s executive director Fatih Birol said in a recent interview.
“The massive cut in OPEC+ oil supply increases energy security risks worldwide. Even taking into account lower demand expectations, it will sharply reduce a much-needed build in oil stocks through the rest of this year and into the first half of 2023,” the report said.
However, the IEA does not expect the OPEC supply cut to actually be two million barrels per day next month. The majority of the alliance’s members are already producing way below their ceilings due to capacity constraint issues.
As such, the IEA is expecting the actual production cut from the OPEC nations to be around one million barrels per day, with much of the reduction coming in from Saudi Arabia and the United Arab Emirates.
US Oil Output, ReservesThe IEA report also points out that U.S. shale producers used to be the most responsive to changing conditions in the oil market. Now, however, they are struggling due to cost inflation and supply-chain constraints.
To make matters complicated, President Joe Biden has used America’s Strategic Petroleum Reserves (SPR) in a bid to lower gasoline prices.
The Biden administration has released more oil from U.S. reserves than all previous administrations combined. As a consequence, the SPR is now at its lowest level since 1984.
House Minority Leader Kevin McCarthy (R-Calif.) has called for implementing legal safeguards to ensure that the president cannot use the country’s critical SPR for political purposes. Biden has decided to release 15 million barrels of oil from the reserves ahead of the November midterms.