Surge in global oil sup­ply may over­take de­mand in 2018

Iran Daily - - Tse & Global Economy -

The rise in global oil pro­duc­tion, led by the US, is likely to out­pace growth in de­mand this year, the In­ter­na­tional En­ergy Agency said. The Paris-based IEA raised its fore­cast for oil de­mand growth in 2018 to 1.4 mil­lion bar­rels per day, from a pre­vi­ous pro­jec­tion of 1.3 mil­lion bpd, af­ter the In­ter­na­tional Mon­e­tary Fund upped its es­ti­mate of global eco­nomic growth for this year and next, ac­cord­ing to Arab News.

Oil de­mand grew at a rate of 1.6 mil­lion bpd in 2017, the IEA said in its monthly mar­ket re­port.

How­ever, the rapid rise in out­put, par­tic­u­larly in the US, could well out­weigh any pick-up in de­mand and be­gin to push up global oil in­ven­to­ries, which are now within sight of their five-year av­er­age.

“To­day, hav­ing cut costs dra­mat­i­cally, US pro­duc­ers are en­joy­ing a se­cond wave of growth so ex­tra­or­di­nary that in 2018 their in­crease in liq­uids pro­duc­tion could equal global de­mand growth,” the IEA said.

“In just three months to Novem­ber, (US) crude out­put in­creased by a colos­sal 846,000 bpd and will soon over­take that of Saudi Ara­bia. By the end of this year, it might also over­take Rus­sia to be­come the global leader.”

US crude out­put could reach 11 mil­lion bpd by the end of the year, ac­cord­ing to es­ti­mates from the US En­ergy In­for­ma­tion Ad­min­is­tra­tion.

OPEC, along with other ex­porters such as Rus­sia, have agreed to main­tain a joint restric­tion on crude sup­ply for a se­cond year run­ning in 2018, to force in­ven­to­ries to drain and sup­port prices.

Oil in­ven­to­ries across the world’s rich­est na­tions fell by 55.6 mil­lion bar­rels in De­cem­ber to 2.851 bil­lion bar­rels, their steep­est one-month drop since Fe­bru­ary 2011, the IEA said.

For 2017 as a whole, in­ven­to­ries fell by 154 mil­lion bar­rels, or at a rate of 420,000 bpd. By the year-end they were only 52 mil­lion bar­rels above the five-year av­er­age, with stocks of oil prod­ucts be­low that bench­mark, the IEA said.

“With the sur­plus hav­ing shrunk so dra­mat­i­cally, the suc­cess of the out­put agree­ment might be close to hand. This, how­ever, is not nec­es­sar­ily the case: Oil price rises have come to a halt and gone into re­verse, and, ac­cord­ing to our sup­ply/de­mand bal­ance, so might the de­cline in oil stocks, at least in the early part of this year.”

Oil pro­duc­tion out­side OPEC na­tions fell by 175,000 bpd in Jan­uary to 58.6 mil­lion bpd, but was still 1.3 mil­lion bpd higher than Jan­uary last year, pre­dom­i­nantly be­cause of the 1.3-mil­lion-bpd year-on-year in­crease in US out­put.

OPEC out­put was largely steady at 32.16 mil­lion bpd in Jan­uary and com­pli­ance with the sup­ply deal reached 137 per­cent, due in part to de­clines in Venezuela, where eco­nomic cri­sis has par­a­lyzed much of the coun­try’s oil pro­duc­tion ca­pac­ity.

The IEA es­ti­mates de­mand for OPEC’S crude in 2018 will av­er­age 32.3 mil­lion bpd, af­ter drop­ping to 32.0 mil­lion in the first quar­ter of the year.

The IEA said oil prices, which briefly touched a high of $71 a bar­rel in Jan­uary, could be sup­ported even if US pro­duc­tion rises, pro­vided global growth re­mains strong, or if un­planned sup­ply out­ages per­sist.

“If so, most pro­duc­ers will be happy, but if not, his­tory might be re­peat­ing it­self,” the IEA said.


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