The International Energy Agency (IEA) warned that OPEC+ supply restrictions might deplete oil stocks in the remaining months of this year, potentially raising prices even more, before economic headwinds cap global demand growth in 2024.

Brent crude prices reached highs of over $88 a barrel on Thursday, the highest since January, as a result of tighter supplies brought on by OPEC and its allies, collectively known as OPEC+, cutting their oil output. These production cuts have also been accompanied by an increase in global demand.

Oil inventories could decrease by 2.2 million barrels per day (bpd) in the third quarter and 1.2 million bpd in the fourth, according to the IEA, if OPEC+ present targets are maintained, “with a risk of driving prices even higher.”

“Deepening OPEC+ supply cuts have collided with improved macroeconomic sentiment and all-time high world oil demand,” the Paris-based energy watchdog said in its monthly oil market report.

In order to support the market, the Organisation of the Petroleum Exporting Countries (OPEC) and its allies started to restrict production in late 2022. In June, they extended supply restraints into 2024.

According to the IEA, a significant drop in Saudi Arabia’s output in July contributed to a 910,000 bpd drop in world oil supplies. However, the IEA reported that in July, Russian oil exports were stable at about 7.3 million bpd.

According to the IEA, demand growth is expected to significantly drop down to 1 million bpd next year due to the growing popularity of electric vehicles, sluggish macroeconomic conditions, and a post-pandemic recovery that is running out of steam.

“With the post-pandemic rebound largely completed and as multiple headwinds challenge the OECD’s outlook, oil consumption gains slow markedly,” the IEA said, referring to Organisation for Economic Co-operation and Development nations.

Contrasting with that of OPEC, which on Thursday maintained its prediction that oil demand will climb by a significantly greater 2.25 million bpd in 2024, the IEA’s demand growth forecast is down by 150,000 bpd from last month.

“The global economic outlook remains challenging in the face of soaring interest rates and tighter bank credit, squeezing businesses that are already having to cope with sluggish manufacturing and trade,” the IEA said.

The gap between the IEA and OPEC for 2023 has shrunk.

According to the IEA, demand will rise by 2.2 million bpd in 2023 as a result of greater summer air travel, higher oil consumption for power generation, and booming Chinese petrochemical activity. OPEC observes a 2.44 million bpd increase.

Despite worries about the state of the economy of the top oil importer in the world, the IEA predicted that demand will increase by an average of 102.2 million bpd this year, with China accounting for more than 70% of growth.

(Adapted from Forbes.com)