Oil mar­ket ad­e­quately sup­plied for now: IEA

The price of global bench­mark Brent crude has risen from around $45 a bar­rel in June 2017 and peaked at over $85 this month on bullish bets by spec­u­la­tors.

Times of Oman - - MARKET -

LON­DON: Oil mar­kets look “ad­e­quately sup­plied for now” af­ter a big pro­duc­tion in­crease in the last six months, but the in­dus­try is com­ing un­der strain, the West’s en­ergy watch­dog said on Fri­day.

The In­ter­na­tional En­ergy Agency (IEA) said in its monthly re­port that the world’s spare oil pro­duc­tion ca­pac­ity was down to 2 per cent of global de­mand, with fur­ther falls likely.

“This strain could be with us for some time and it will likely be ac­com­pa­nied by higher prices, how­ever much we re­gret them and their po­ten­tial neg­a­tive im­pact on the global econ­omy,” the Paris­based or­gan­i­sa­tion said.

Mem­bers of the Or­gan­i­sa­tion of the Petroleum Ex­port­ing Coun­tries (Opec) and other ex­porters such as Rus­sia agreed in June to raise out­put as the mar­ket ap­peared in­creas­ingly tight.

The price of global bench­mark Brent crude has risen from around $45 a bar­rel in June 2017 and peaked at over $85 this month on bullish bets by spec­u­la­tors.

Opec, Rus­sia and oth­ers such as US shale com­pa­nies had in­creased pro­duc­tion sharply since May, the IEA said, rais­ing global out­put by 1.4 mil­lion bar­rels per day (bpd).

Over­all, Opec had boosted pro­duc­tion by 735,000 bpd since May as Mid­dle East Gulf pro­duc­ers such as Saudi Ara­bia and the UAE more than com­pen­sated for de­clin­ing out­put in Venezuela and Iran, which is fac­ing US sanc­tions from next month. Sup­ply from Iran dur­ing Septem­ber dropped to a two-and-a-half year low, the IEA said, as cus­tomers con­tin­ued to cut back in the run-up to new sanc­tions, which start on Nov. 4.

Ira­nian out­put fell to 3.45 mil­lion bpd, it said, down 180,000 bpd month-on-month. Ira­nian oil ex­ports in Septem­ber fell to 1.63 mil­lion bpd, down 800,000 bpd from re­cent 2Q18 peaks, the agency es­ti­mated. “The de­cline may deepen sig­nif­i­cantly ahead of US sanc­tions — and sub­se­quently as fi­nal car­goes are de­liv­ered,” said the IEA, which ad­vises ma­jor oil con­sumers on en­ergy pol­icy.

Con­sump­tion is fal­ter­ing

But the out­look for world oil con­sump­tion is fal­ter­ing, the IEA said as it cut its fore­cast of global oil de­mand growth by 0.11 mil­lion bpd for both this year and next to 1.28 mil­lion bpd and 1.36 mil­lion bpd re­spec­tively.

“This is due to a weaker eco­nomic out­look, trade con­cerns, higher oil prices,” it said.

OECD com­mer­cial stocks rose by 15.7 mil­lion bar­rels in Au­gust to 2.854 bil­lion bar­rels, their high­est level since Fe­bru­ary, on strong re­fin­ery out­put and liq­ue­fied petroleum gas re­stock­ing, the IEA said.

It added that OECD in­ven­to­ries were likely to have risen by 43 mil­lion bar­rels in the third quar­ter, the largest quar­terly in­crease in stocks since the first quar­ter of 2016.

“The in­crease in net pro­duc­tion from key sup­pli­ers since May of ap­prox­i­mately 1.4 mil­lion bpd, led by Saudi Ara­bia, and the fact that oil stocks built by 0.5 mil­lion bpd in 2Q18 and look likely to have done the same in 3Q18, lends weight to the ar­gu­ment that the oil mar­ket is ad­e­quately sup­plied for now,” the IEA said.

- Reuters file pic­ture

VI­TAL FUEL: The In­ter­na­tional En­ergy Agency (IEA) said in its monthly re­port that the world’s spare oil pro­duc­tion ca­pac­ity was down to 2 per cent of global de­mand, with fur­ther falls likely.

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