IEA says strong oil demand growth helping market rebalance

World oil demand will grow more than expected this year, helping to ease a global glut despite rising production from North America and weak OPEC compliance with output cuts, the International Energy Agency (IEA) said yesterday.

The agency raised its 2017 demand growth forecast to 1.5 million barrels per day (bpd) from 1.4 million bpd in its previous monthly report and said it expected demand to expand by a further 1.4 million bpd next year.

“Producers should find encouragement from demand, which is growing year-on-year more strongly than first thought,” said the Paris-based IEA, which advises industrialised nations on energy policy.

“There would be more confidence that rebalancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve,” the IEA said.

The Organisation of the Petroleum Exporting Countries is curbing output by about 1.2 million bpd, while Russia and other NON-OPEC producers are cutting a further 600,000 bpd until March 2018 to help support oil prices.

The IEA said OPEC’S compliance with the cuts in July had fallen to 75 percent, the lowest since the cuts began in January.

It cited weak compliance by Algeria, Iraq and the United Arab Emirates.

In addition, OPEC member Libya, which is currently exempt from the output cuts, steeply increased output.

As a result, the overall global oil supply rose by 520,000 bpd in July to stand 500,000 bpd above year-ago levels.

Adding to the challenges of oil producers to support oil prices is rising NON-OPEC output, which is expected to expand by 0.7 million bpd in 2017 and by 1.4 million bpd in 2018 on strong gains in the United States, which is not participating in the output caps.

Still, strong global demand growth is helping to clear excess barrels with the IEA registering a decline in stocks in industrialised nations in both June and July.

Stocks remain 219 million barrels above a 5-year average - a level that OPEC is targeting with its output cuts.

The IEA also revised historic demand data for 2015-2016 for developing countries, cutting it by 0.2-0.4 million bpd.

The European Commissioner charged with food safety has called for a meeting of ministers and national watchdogs to discuss the fallout of an eggs contamination scare that has led to finger pointing between several European Union members.

Tensions have risen between agricultural ministers in Belgium, the Netherlands and Germany after traces of moderately toxic insecticide fipronil were found in batches of eggs, linked by authorities to a Dutch supplier of cleaning products.

While initially the Belgian food safety regulator drew criticism from abroad for not acting fast enough after being made aware of fipronil contamination, Belgium’s agriculture minister on Wednesday said it was the Dutch who were too slow to respond to inquiries.

“Blaming and shaming will bring us nowhere and I want to stop this,” EU Commissioner Vytenis Andriukaitis told Reuters in a statement.

Andriukaitis said he hoped to gather a meeting before the end of September of the ministers concerned, along with the various national food safety agency representatives.

“We need to work together to draw lessons learnt and move forward instead of losing energy on finger pointing,” he said.

Millions of eggs have been pulled from European supermarket shelves, though some national regulators have voiced concern that many contaminated eggs have entered the food chain, mainly through processed products such as biscuits and cakes.

While a large amount of contaminated eggs would need to be eaten to show negative health effects, fipronil is considered moderately toxic and can cause organ damage in humans.

Fipronil is widely used to treat pets for ticks and fleas but its use in the food chain, for example to clean out barns, is forbidden.

Dutch authorities on Thursday arrested two directors of the company at the centre of the food safety scare, with prosecutors saying they suspected them of threatening public health and possession of a prohibited pesticides.