IEA: Oil from Opec’s rivals to exceed demand growth
Agency says more than enough supply for next year
LONDON: New oil supplies from Opec’s rivals will be more than enough to meet growth in demand next year, the International Energy Agency said in its first forecast for 2018, an indication the cartel may need to extend production cuts further.
The US, Brazil, Canada and other producers outside the Organization of Petroleum Exporting Countries will increase output next year by the most in four years, the IEA said.
So while the cutbacks should reduce the world’s bloated oil inventories to average levels by the time they’re scheduled to end next spring, demand for Opec crude won’t be high enough for the group to reverse the curbs without seeing stockpiles rise again.
“Our first outlook for 2018 makes sobering reading for those producers looking to restrain supply,” said the Paris-based IEA, which advises most of the world’s major economies on energy policy.
Oil prices have slipped 14% in New York this year as hopes that supply curbs by Opec and partners such as Russia would end a three-year surplus have given way to concern that the cuts aren’t deep enough and that US shale drillers will fill any shortfall.
Global oil demand growth will accelerate next year to 1.4 million barrels a day, or 1.5%, led by economic expansion in China and India. Demand will surpass 100 million barrels a day for the first time in the fourth quarter of 2018.
Still, supplies outside Opec will grow even faster, by almost 1.5 million barrels a day, with about half the expansion coming from US crude production.
The nation’s shale-oil explorers, who first triggered the glut Opec is trying to contain, have emerged more efficient from the oil market’s three-year slump.
The last time non-Opec supply growth exceeded the increase in demand was 2014, when oil prices slumped 46%.
As a result, demand for Opec’s crude next year will be about 200,000 barrels a day lower than this year, at 32.6 million barrels a day.
While that means Opec, which pumped 32.1 million a day in May, could reverse some of the cuts it’s made, it couldn’t fully restore output without tipping world markets back into oversupply.
Completely reversing the cuts next April would result in a surplus of about 500,000 barrels a day, the data indicates.
Opec and 11 allies agreed on May 25 to prolong production cuts through to April 1, after judging that curbs made in the first half of this year wouldn’t be enough to reduce oil inventories in developed nations to their fiveyear average. While those supply reductions should eventually succeed, progress is much slower than expected, the IEA said.
Oil inventories in developed nations remain higher than before Opec started cutting production. After increasing in April by more than normal for the time of year, stockpiles are 292 million barrels above their fiveyear average, the agency said. Inventories have increased by about 360,000 barrels a day so far this year, it said.