IEA sees oil market flipping into deficit in 2nd quarter

LONDON: The oil market will flip into a modest deficit from the second quarter of this year, with Opec possessing a hefty supply cushion to prevent any price rally in case of possible supply disruptions, the International Energy Agency said on Friday.

The IEA, which coordinates the energy policies of industrialised nations, kept its forecast of growth in global oil demand this year unchanged at 1.4 per cent, or 1.4 million barrels per day (bpd).

Solid growth in non-opec oil output led by the United States should ensure demand is met, the IEA said. The Paris-based IEA said the market could show a modest surplus in the first quarter of 2019 before flipping into a deficit in the second quarter by about 0.5 million bpd.

“At the same time, (Opec) production cuts have increased the spare capacity cushion. This is especially important now as economic sentiment is becoming more pessimistic and the global economy could be entering a vulnerable period,” the IEA added.

The agency said was particularly concerned about a possible further decline in production in Venezuela, where output has stabilised at 1.2 million bpd in recent months.

It said the degradation of the Venezuelan power system, vital for oil output, was such that it could not be sure whether fixes were durable.

However, in the event of a major loss of Venezuelan supply, the Organization of the Petroleum Exporting Countries had about 2.8 million bpd of effective spare capacity, the IEA said.

The agency also said rising US output was providing comfort to world markets. it