First Published: 2013-01-19

 

Oil market tightens: Hostage drama clouds Algerian energy sector

 

IEA says dominant factor in global energy market now has lot to do with political risk writ large, includes regulatory risks.

 

Middle East Online

By Hugh Dent – PARIS

Sobering view of oil market

Price pressures on the global oil market have suddenly tightened, and the deadly hostage drama at a gas field in Algeria puts a "dark cloud" over the country's entire energy sector, the International Energy Agency warned on Friday.

The IEA said that a dominant factor in the global energy market now "has a lot to do with political risk writ large, and not just in Syria, Iran, Iraq, Libya or Venezuela", and included regulatory risks.

The agency raised its forecast for global oil demand this year by 240,000 barrels per day from its estimate in December to 90.8 million barrels per day, and to 930,000 bpd or 1.0 percent more than in 2012.

The IEA said that its estimates for global oil demand this year suddenly looked tighter mainly because of unexpectedly strong data for demand in the United States and China in the last quarter of last year.

But while warning that a rebound into bull market conditions was possible, the agency said the signs were not yet clear and it warned that some data was uncertain and would be volatile.

The IEA, commenting on its overall interpretation of data in its monthly report, said that "brutal swings in apparent demand in both directions may become a fact of life, masking unreported inventory builds and draws."

It said that the United States was by far the biggest user of oil in October, consuming twice as much as the next biggest user China, which in turn which used twice as much as the third-biggest, Japan.

Initial data showing US consumption in the last quarter at an average of 18.84 mbd, which was 155,000 bpd more than the agency had forecast in December, "surprised on the upside", the agency said.

As a result, US demand will decline by the lowest rate for nearly two years and, in view of a less pessimistic economic climate in the United States, the data support the view of the International Monetary Fund that global economic growth will remain above 2.0 percent this year.

On the attack on the In Amenas gas field in Algeria on Wednesday, the IEA warned: "The 16 January kidnapping and murder of foreign oil workers at the In Amenas gas field has cast a dark cloud over the outlook for the country's energy sector.

"Production at the field was shut in, including an estimated 50,000 barrels per day of condensate," the IEA said, referring to claims by Islamist attackers that they had acted in retaliation for French military action against Islamists in Mali.

The IEA noted that the In Amenas field was a joint venture grouping the operator Statoil (of Norway), BP and state-run Sonatrach and involving Japanese engineering firm JGC.

The IEA, the energy arm of the 34-member Organisation for Economic Cooperation and Development, said the outlook for its first monthly report of the year "paints a sobering" view of the oil market.

In "one fell swoop" the estimated demand for oil from members of the Organisation of Petroleum Exporting Countries in the last quarter of last year had risen by 400,000 barrels per day.

"All of a sudden the market looks tighter than we thought," the IEA said.

Under a headline "Crouching Tiger, Hidden Dragon", the IEA said that owing to uncertainty about data, notably concerning demand in China and production in Saudi Arabia, it might be too early to "declare the start of a new market cycle or a return to the bull market of yesteryear."

The bull market of 2003-08 had been driven by demand and worries about supplies. A bear market followed, driven by the financial crisis. Now "political risk" is a central driving factor, including regulatory issues and changes, the IEA said.

"Changes in tax and trade policies, in China as in Russia, can, at the stroke of a pen, shake up crude and products markets and redraw the oil trade map," it said.

The countries in the OECD area were also subject to political risks in part because "above-ground" issues such as export and shipping legislation had become misaligned.

Global supplies of oil fell by 170,000 bpd in December to 91.2 mbd but supplies from countries outside OPEC surged by 90,000 bpd from the November level to 54.2 mbd. They were expected to rise by 590,000 bpd in the first quarter of this year on a 12-month comparison, and for the whole of 2013 were expected to rise by 980,000 bpd to 54.3 mbd which would be the strongest growth rate since 2010.

But supplies from OPEC fell to the lowest level for a year to 30.65 mbd on reduced output by Saudi Arabia and Iraq. However average production by OPEC last year reached a record high level and the agency raised its expected demand for OPEC oil this year by 100,000 bpd to 30.0 mbd.

The IEA noted that OPEC had decided on December 12 to hold its production target at 30.0 mbd.

 

IS bid to seize Kobane stalls amid air strikes

Six Tunisians killed in police-gunmen standoff

South Yemen separatists vow to intensify secession protests

Saudi Arabia jails mothers for preparing sons to wage jihad

Morocco fossils: A rare and vanishing treasure

Germany offers to help Armenia forge peace with Turkey

Libya wakes up from ‘Dubai dream’ to face Somalia-like ‘failed state’

Relatives of Iraq massacre victims: Blackwater guards should be killed

Ghannouchi makes it clear to Tunisia: It’s either political Islam or Daesh!

Deadly clashes erupt after army raid in northern Lebanon

200 Iraqi Kurd fighters to travel through Turkey to Kobane

Coalition strikes in Syria eliminate more than 500 jihadists in one month

Ahead of elections, new clashes remind Tunisia of need to fight terror

Jury finds Blackwater guards guilty of 2007 'massacre' in Iraq

Iraq Kurds approve reinforcements for Kobane

Israel classifies car crash as ‘hit and run terror attack’

Turkish woman arrested for stepping on Koran

Erdogan criticises US for airdrops on Kobane

Iraq schools provide shelter but late to open for classes

Syria air force shoots down two of three 'IS warplanes'

Egypt court rules on ‘Nasr City terror cell’

Fire from Egypt wounds two Israeli soldiers near border

By hook or by crook, settlers notch up property gains in East Jerusalem

Turkey envoy meets leader of parallel government in Libya

Israel arrests seven Palestinian fishermen off northern Gaza

Khamenei to Abadi: Iraq can beat 'Islamic State' without foreign troops

Saudi special court rules in cases of riots and terrorism

Libya army scores small victory in Benghazi

Only in Libya: Government calls for civil disobedience

Kasserine reaps bitter harvest from Tunisia revolution: Poverty and terrorism

Iraq Kurds set to vote on deployment of Peshmerga forces to Syria

Islamic State ‘share in US weapons’ embarrasses Pentagon

Alderton: Morocco unrivalled business gateway to sub-Saharan Africa

Protests over IS turn Istanbul University into war zone

Turkey eyes stricter punishment against lawbreakers at protests

For Sudan President: Promises are something and re-election is something else

Iran returns Abadi to ‘house of obedience’

From traditional military to counterinsurgency force: Syria army grows more capable

South Sudan rivals accept 'responsibility' for civil war

British drones in Iraq also used for Syria surveillance

Turkey launches new wave of wire-tapping arrests

Rise of Shiite militias challenges government authority in Iraq

Syria Kurds show impressive resistance to ‘Islamic State’ in Kobane

Vote or boycott: Grim record of self-serving politicians puts off voters in Tunisia

Egypt universities tighten security to avoid new Islamist violence