Oil mar­ket mov­ing back into bal­ance: IEA

Financial Chronicle - - PLAN, POLICY -

THERE are signs that the global oil mar­ket is re­turn­ing to bal­ance and stocks of oil prod­ucts in in­dus­tri­alised na­tions could soon fall be­low their five-year av­er­age, the IEA said on Wed­nes­day.

The In­ter­na­tional En­ergy Agency also said pro­duc­tion by the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (Opec) and its al­lies fell in Au­gust and com­pli­ance with their pact to cut sup­ply to the mar­kets in­creased.

Opec and a num­ber of other pro­duc­ers in­clud­ing Rus­sia agreed last year on pro­duc­tion cuts to ease a global sup­ply glut, but prices haven’t risen much above $50 per bar­rel as com­pli­ance has been a prob­lem. But with oil de­mand perk­ing up as well as hur­ri­canes and reg­u­lar sum­mer main­te­nance knock­ing out some pro­duc­tion, IEA said it has seen some of that glut dis­ap­pear.

Within in­dus­tri­alised coun­tries that are mem­bers of the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment (OECD) oil “prod­uct stocks are now only 35 mil­lion bar­rel above the fiveyear av­er­age,” IEA said in its monthly re­port.

In­dus­try and govern­ment oil prod­ucts stocks stood at 1,796.3 mil­lion bar­rels at in July in the 34 coun­tries that make up Opec. “De­pend­ing on the pace of re­cov­ery for the US re­fin­ing in­dus­try post-(Hur­ri­cane) Har­vey, very soon OECD prod­uct stocks could fall to, or even be­low, the five-year level,” added IEA. “Based on re­cent bets made by in­vestors, ex­pec­ta­tions are that mar­kets are tight­en­ing and that prices will rise, al­beit very mod­estly,” the Paris-based or­gan­i­sa­tion said.

Look­ing at re­cent de­vel­op­ments in the oil fu­tures mar­kets, IEA called them “a sign that oil mar­kets have started to re­bal­ance”.

On Tues­day, Opec, in its monthly re­port, also pointed to a de­cline in its pro­duc­tion in Au­gust as a sign that sup­ply and de­mand could be mov­ing fur­ther to­ward bal­ance. “It is clear that the re­bal­anc­ing process is un­der way, sup­ported by the high con­form­ity lev­els of Opec mem­ber coun­tries and par­tic­i­pat­ing non-Opec coun­tries to the pro­duc­tion ad­just­ments” in the co­op­er­a­tion agree­ment, Opec sec­re­tary gen­eral Sanusi Barkindo said in a speech in Ox­ford on Mon­day.

IEA said Opec crude pro­duc­tion fell in Au­gust for the first time in 5 months, thanks to both cuts in pro­duc­tion as well as a flare-up in tur­moil in Libya dis­rupt­ing out­put. Com­pli­ance with agreed pro­duc­tion cuts among the 12 mem­bers bound by the pact rose to 82 per cent from 75 per cent in July.

The 10 non-Opec pro­duc­ers that are part of the sup­ply cut pact also cut pro­duc­tion by 270,000 bar­rels per day in Au­gust from July, and their out­put is now 640,000 bar­rels per day their pledged level.

IEA said the im­pact of Hur­ri­cane Har­vey, which struck the US Gulf Coast at the end of Au­gust where sig­nif­i­cant US re­fin­ery and ex­port op­er­a­tions are con­cen­trated, on oil mar­kets should be brief. “As far as Har­vey is con­cerned, dis­rup­tion to lo­cal oil mar­kets in the US Gulf Coast is eas­ing on a daily ba­sis and its im­pact on global mar­kets is likely to be rel­a­tively short-lived,” IEA said , which ad­vises the OECD on en­ergy mar­kets.

IEA also raised its fore­cast for growth in global oil de­mand af­ter thirst for crude “grew very strongly year-on-year” in the sec­ond quar­ter of this year.

It now sees global oil de­mand in­creas­ing by 1.6 mil­lion bar­rels per day (mbd), to 97.7 mbd on av­er­age in 2017, thanks to brisk con­sump­tion in Europe and the US. Oil prices rose af­ter the re­port was pub­lished, with Brent crude adding 10 cents to $54.37 per bar­rel.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.