‘Grim eco­nomic news’ pres­sures oil —

Financial Mirror (Cyprus) - - FRONT PAGE -

The In­ter­na­tional En­ergy Agency (IEA) com­mented in its Jan­uary Oil Mar­ket re­port that the down­ward pres­sure on oil was due to a small num­ber of large fac­tors. The one that should worry econ­o­mists and na­tional lead­ers is that “grim eco­nomic news” was at the top of the list.

The other two pri­mary causes were a warm win­ter across much of the North­ern Hemi­sphere and over­sup­ply. In the re­port, the IEA ex­perts wrote: Per­sis­tent over­sup­ply, bloated in­ven­to­ries and a slew of neg­a­tive eco­nomic news pres­sured prices so that by midJan­uary crude oil touched 12-year lows. The OMR out­look for 2016 has de­mand growth mod­er­at­ing to 1.2 mil­lion b/d.

Global oil sup­plies ex­panded by 2.6 mb/d last year, fol­low­ing hefty gains of 2.4 mb/d in 2014. By last De­cem­ber, how­ever, growth had eased to 0.6 mb/d, with lower nonOPEC pro­duc­tion that pegged below year-ear­lier lev­els for the first time since Septem­ber 2012.

OPEC crude out­put eased by 90,000 bar­rels per day in De­cem­ber to a still-lofty 32.28 mb/d, in­clud­ing newly re­joined In­done­sia. Iran, now re­lieved of sanc­tions, in­sists it will boost out­put by an i mme­di­ate 500,000 b/d. Our as­sess­ment is that around 300,000 b/d of ad­di­tional crude could be flow­ing to world mar­kets by the end of the cur­rent quar­ter.

Global in­ven­to­ries rose by a no­tional 1 bln bar­rels in 201415, with the fun­da­men­tals sug­gest­ing a fur­ther build of 285 mln bar­rels over the course of this year. De­spite sig­nif­i­cant ca­pac­ity ex­pan­sions in 2016, this stock build will put stor­age in­fra­struc­ture un­der pres­sure and could see float­ing stor­age be­come prof­itable.

Global re­fin­ery runs av­er­aged 79.5 m b/d in the fourth quar­ter of 2015, down 0.3 mb/d from the es­ti­mate in last month’s OMR due to lower-than-ex­pected through­puts in non-OECD Asia ex­cept China and a very high main­te­nance sched­ule in Oc­to­ber.

Global re­fin­ery mar­gins weak­ened in De­cem­ber as middle dis­til­late cracks fell and over­whelmed the re­silience of gaso­line and naph­tha.

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