IEA raises es­ti­mate of sur­plus oil sup­ply on higher OPEC out­put

The Pak Banker - - MARKETS/SPORTS -

The global oil sur­plus will be big­ger than pre­vi­ously es­ti­mated in the first half, in­creas­ing the risk of fur­ther price losses, as OPEC mem­bers Iran and Iraq bol­ster pro­duc­tion while de­mand growth slows, ac­cord­ing to the In­ter­na­tional En­ergy Agency.

Sup­ply may ex­ceed con­sump­tion by an av­er­age of 1.75 mil­lion bar­rels a day in the pe­riod, com­pared with an es­ti­mate of 1.5 mil­lion last month, and the ex­cess could swell if OPEC adds more out­put, the IEA said. Iran raised pro­duc­tion in Jan­uary fol­low­ing the re­moval of in­ter­na­tional sanc­tions, Iraqi vol­umes reached a record and Saudi Ara­bia also ramped up out­put. The agency trimmed es­ti­mates for global oil de­mand.

"With the mar­ket al­ready awash in oil, it is very hard to see how oil prices can rise sig­nif­i­cantly in the short term," the Paris-based ad­viser to 29 na­tions said in its monthly mar­ket re­port. "In th­ese con­di­tions the short term risk to the down­side has in­creased."

Oil prices re­main capped near $30 a bar­rel af­ter slump­ing to a 12-year low in late Jan­uary. While prices re­cov­ered on spec­u­la­tion that the Or­ga­ni­za­tion of Pe­tro­leum Ex­port­ing Coun­tries might agree to pro­duc­tion curbs with non-mem­bers, "the like­li­hood of co­or­di­nated cuts is very low," ac­cord­ing to the IEA. No agree­ment to re­strain sup­ply emerged last week af­ter Venezue­lan Oil Min­is­ter Eu­lo­gio Del Pino toured oil cap­i­tals from Moscow to Riyadh. Pro­duc­tion from OPEC's 13 mem­bers climbed by 280,000 bar­rels a day last month to 32.63 mil­lion, the IEA said. That's about 900,000 a day more than the av­er­age re­quired from the group in 2016.

Iran ex­panded pro­duc­tion by 80,000 bar­rels a day to 2.99 mil­lion in Jan­uary af­ter reach­ing a deal with world pow­ers that lifted oil sanc­tions in re­turn for lim­its on the na­tion's nu­clear pro­gram. Iraq in­creased out­put by 50,000 bar­rels a day to 4.35 mil­lion and could raise that fur­ther, ac­cord­ing to the IEA, which had pre­dicted in Oc­to­ber that the coun­try would strug­gle to add new sup­plies. Saudi Ara­bia, OPEC's big­gest mem­ber and de facto leader, boosted pro­duc­tion by 70,000 bar­rels a day to 10.21 mil­lion. The IEA low­ered its es­ti­mates for global oil de­mand for last year and 2016, by 100,000 bar­rels a day, leav­ing the level of growth for this year un­changed at 1.2 mil­lion bar­rels a day to av­er­age 95.6 mil­lion a day. That growth is weaker than the five-year peak of 1.6 mil­lion bar­rels a day reached in 2015, amid slow­downs in Europe, China and the U.S.

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