Warm weather, ris­ing out­put threaten oil mar­ket: re­port

The Globe and Mail Metro (Ontario Edition) - - International - AMANDA COOPER

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.

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