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.

 

US warplanes carry out first strikes on IS near Baghdad

Erdogan: Turkey would welcome exiled Brotherhood leaders

UN brokers Israeli-Palestinian deal on Gaza reconstruction

Qaeda branches urge jihadists to unite against US

Scottish independence campaigners find support in Palestinian bagpipers

Iraq parliament votes down PM's security nominees

Despite war, South Sudan replaces foreign workers with locals

IS jihadists shoot down Syria warplane

Renegade former general claims air raid on Libya militia position

Six Egypt policemen in Sinai bomb attack

UEFA urged not to award 2020 European Championship to Israel

Israel sees future war with Hezbollah

Germany tries first 'Islamic State jihadist'

Egypt court bails top 2011 revolt activist

Iran rejected US request to cooperate against IS

Iran ridicules anti-jihadist international conference

Egypt textile factory collapse kills six

Mali separatists agree to speak with one voice

Qatar starts to curb Brotherhood’s activities

Coalition meets in Paris to plan fight against IS

Around 930 French citizens or residents involved 'in jihad' in Iraq, Syria

Yemen rebels, officials to meet with UN to end standoff

Qatar-based Egypt's Brotherhood leaders to relocate

Cameron chairs emergency meeting over British hostage beheading

Hollande defends arming Kurds against IS

43 Israeli soldiers condemn 'abuses' of Palestinians

Egypt urged to free more than 20 demonstrators

Turkey’s internet censored further

Tunisia Islamists clash with police in protest

10 Arab states agree to 'share' US-led fight against IS

Obama awaits Congress approval of Syria rebel aid

Hollande in Iraq to back new government

Lebanon to set up refugee camps along border with Syria

Russia slams unilateral US airstrikes on jihadists in Syria

Four Qaeda suspects in Yemen drone attack

Meshaal: Hamas may hold direct talk with Israel

UN Syria envoy says world must confront terrorist groups

Turkey refuses to allow US-led coalition to hit IS from its air bases

Yemen president, Shiite rebels reach deal

EU warns Gaza violence could re-ignite within 'months'

Thani denies UAE, Egypt conducted air strikes in Libya

Obama: We will destroy ISIL in Syria and Iraq

Beirut urges 'common front' against IS 'monsters'

Obama to steel Americans for long battle against IS

Turkish prosecutor demands life sentences for protesting soccer fans