First Published: 2017-04-13

IEA says world oil 'close to balance' despite OPEC cuts
IEA says supply, demand in oil markets almost the same as production cuts from OPEC countries are offset by rising US supply.
Middle East Online

With oil at above $50 a barrel, higher-cost producers in US have been attracted back to the market

LONDON - Supply and demand in the oil market are close to matching up, the IEA said Thursday, as landmark OPEC-led production cuts are mitigated by rising US supply and slipping worldwide demand growth.

The compliance rate with the agreement among OPEC members and some non-members, including Russia, "has been impressive", the International Energy Agency (IEA) said in its monthly oil market report, giving a lift to oil prices.

But oil at above $50 a barrel has, in turn, attracted higher-cost producers in the United States back to the market, and frantic American drilling will push non-OPEC supply to surprisingly high levels throughout the year, the IEA predicted.

"It can be argued confidently that the market is already very close to balance, and as more data becomes available this will become clearer," it said in the report.

"Although the oil market will likely tighten throughout the year, overall non-OPEC production, not just in the US, will soon be on the rise again," it said.

At the end of November, the Organization of Petroleum Exporting Countries (OPEC) agreed to cut output by 1.2 million barrels per day (mb/d) from January 1, initially for a period of six months.

Then in December, non-OPEC producers led by Russia agreed to cut their own output to 558,000 barrels per day.

The aim was to reduce a glut in global oil supply that had depressed prices.

Reports this week said that OPEC kingpin Saudi Arabia is pushing the cartel's producers to extend the agreement by another six months at their meeting in May.

- A less oil-thirsty world -

The IEA made no prediction about such a likelihood, but said that a consequence of OPEC "hypothetically" renewing the deal would be to support prices more and give further encouragement to US shale oil producers.

This means that non-OPEC oil production will soon be on the rise again.

"Even after taking into account production cut pledges from the eleven non-OPEC countries, unplanned outages in Canada as well as in the North Sea, we expect (non-OPEC) production will grow again on a year-on-year basis by May," the report said.

Oil inventories fell in March but probably showed a rise in the first quarter of this year overall because oil consumers stockpiled crude before the OPEC-led cuts took effect properly, the IEA said.

"The net result is that global stocks might have marginally increased in 1Q17," it said.

On the demand side, the IEA revised down its estimates for the worldwide thirst for oil, meaning there will be more oil available than previously thought.

"New data shows weaker-than-expected growth in a number of countries including Russia, India, several Middle Eastern countries, Korea and the US, where demand has stalled in recent months," it said.

Demand growth for 2017 is now expected to be 1.3 million barrels per day, down from the IEA's previous forecast of 1.4 million.

- Interesting times ahead -

Oil prices declined on Thursday, with US benchmark WTI futures down 10 cents at $53.01 per barrel, and Europe's Brent contracts four cents lower at $55.82.

Analysts cited the IEA report and also OPEC's warning Wednesday that the cartel's efforts to fight a global glut are threatened by American firms pumping oil with gusto.

Commodities analysts at Commerzbank said the question was now "whether the OPEC production cuts really have translated into a reduction in supplies".

Oil prices are still around 25 percent higher than they were a year ago, and roughly stable over the past three months, despite frequent day-to-day volatility.

Analysts struggling to distill conflicting developments into a credible oil price prediction for the rest of the year appeared to have the IEA's sympathy.

"We have an interesting second half to come," it said.

 

Kurds ready for contentious vote in Iraq

The high cost of Syria’s destruction

Iran defies US, tests missile

Yemen's Hadi says military solution 'most likely'

The Sahara Forest Project, Jordan’s innovative water scheme

Palestinian negotiator awaits lung transplant in US

A Kurdish state: Reality or utopia?

Saudi intercepts missile fired from Yemen

Saudi Arabia marks national day with fireworks, concerts

Turkey warns of 'security' steps in response to Iraqi Kurd vote

Barzani delays Kurdish independence vote announcement

Syria's war off the radar at UN assembly

For many Iraqis, tradition trumps police

Darfur clashes kill 3 as Bashir urges reconciliation

Saudi cleric banned for saying women have ‘quarter’ brain

Veteran Syrian activist, daughter assassinated in Istanbul

Tunisia drops forced anal exams for homosexuality

Bomb used in Saudi-led strike on Yemen children US-made

Syria Kurds vote to cement federal push

Police charge teenager over London Underground attack

Nigerian official to meet Turkish counterpart over illegal guns

Thousands feared trapped in Raqa as IS mounts last stand

Iraqi forces achieve first step in new offensive on IS

Migrant boat sinks off Turkish Black Sea coast leaving four dead, 20 missing

Trump praises 'friend' Erdogan

Yemen leader promises UN to open entire country to aid

Rouhani vows Iran will boost missiles despite US criticism

Russia clashes with EU over Syria

UN Security Council warns against holding Iraqi Kurd vote

UN sets up probe of IS war crimes in Iraq

US, Iranian top diplomats confront each other for first time

Air strikes kill 22 civilians in northwest Syria in 48 hours

Iranian supreme leader lashes out at Trump UN speech

Thousands of Huthi supporters mark 3 years since Sanaa takeover

Iraq attacks all remaining IS territory at once

Moscow accuses US of hitting Syrian regime forces

Turkey jails lawyers representing hunger striking teachers

Turkey, Iran and Iraq make joint threat against Kurd vote

Syrian Kurds to hold first local elections in federal push

Qatari expats lauded as statesmen by Arab critics

Shipwreck off Libyan coast leaves over 100 migrants missing

Will Turkey’s opposition to Kurdish state translate into action?

US ups the ante on Iraq Kurds

Macron: Iran nuclear deal no longer enough

Trump’s mind made up on Iran but refuses to divulge