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.

 

Erdogan urges world to recognise Jerusalem as Palestinian capital

Saudi, UAE seeks to help West Africa fight terrorism

US skeptical about Putin's declaration of military victory in Syria

Senior Saudi prince blasts Trump's "opportunistic" Jerusalem move

Saudi Arabia lifts decades-long ban on cinemas

UAE oil giant floats 10 percent of retail arm to strong interest

Growing concern about rise of far-right in Austria

Israeli sentenced to four years for arson attack on church

Erdogan risks sabotaging fragile relations with Israel

6.2-magnitude earthquake strikes Iran

Two Gazans killed by Israeli ‘strike’, Israel denies claim

French FM accuses Iran of carving out ‘axis’ of influence

Somali journalist killed in front of children

Over 170 dead after South Sudan rival cattle herders clash

Russia begins partial withdrawal from Syria

Russia weary of returning IS jihadists before World Cup, election

EU accused of complicity in Libya migrant rights violations

Pentagon skeptical about Russia's Syria pullout claims

EU says Syria war ‘ongoing’ despite Russia pullout

Istanbul nightclub gunman refuses to testify

Integrating Syrians in Turkey carries implications

US opinion views Muslims and Arabs more favourably but political affiliation makes a difference

Iranian conservative protesters say Trump hastening end of Israel

Kuwait ruler’s son named defence minister

Jordan referred to UN for failing to arrest Sudanese president

Turkey demands life for journalists in coup bid trial

Netanyahu expects EU to follow suit on Jerusalem

Putin orders withdrawal of ‘significant’ amount of troops from Syria

Putin to meet with Sisi in Cairo

GCC at a critical juncture

Houthi rebels tighten grip on Sanaa after Saleh’s assassination

Israel’s Syrian air strikes risk renewing escalation as Iran expands presence in Golan

Qatar to acquire 24 Typhoon fighters from UK

Bahraini civil society group criticised after Israel visit

Israel PM faces renewed pressure in Europe

Palestinian stabs Israeli guard in ‘terrorist’ attack

UAE’s Sheikh Mohammed says US Jerusalem decision could help terrorists

Fateh encourages more protests, refuses to meet Pence

Chinese electric carmaker to open Morocco factory

Iraqi victory over IS remains fragile

Morocco’s renewed ties with South Africa likely to consolidate support for Western Sahara stance

Lebanese security forces fire tear gas at protestors

Syria’s justice system: ‘working without a written law'

Egypt revives controversial desert capital project

Iran sentences fugitive ex-bank chief to jail