Warm weather, rising output threaten oil market: report
Global oil demand growth looks likely to increase more slowly over the coming months, as warmer temperatures cut consumption, which may tilt the market back into surplus in the first half of next year, the International Energy Agency said on Tuesday.
In its monthly oil market report, the Paris-based IEA cut its oil demand forecast by 100,000 barrels a day for this year and next, to an estimated 1.5 million b/d in 2017 and 1.3 million b/d in 2018.
Geopolitical tension in the Middle East and intermittent supply outages in the likes of Nigeria and Iraq have pushed oil above $60 (U.S.) a barrel for the first time since 2015, while global inventories have fallen, prompting many market watchers to raise their price forecasts.
“Does it mean the market has found a ‘new normal’ where the accepted floor might have moved from $50/bbl to $60/bbl? This might be a tempting view, assuming supply disturbances will continue and tensions in the Middle East will not ease,” the IEA said.
“However, if these problems do prove to be temporary, a fresh look at the fundamentals confirms the view we expressed last month that the market balance in 2018 does not look as tight as some would like, and there is not in fact a ‘new normal.’ ”
The IEA noted that output by the Organization of the Petroleum Exporting Countries was down by 830,000 b/d year on year in October, although demand for the group’s crude is expected to fall to 32.6 million b/d in the fourth quarter of this year and to 32.0 million b/d in the first quarter of 2018.