IEA follows OPEC’s lead, cuts world oil demand due to geopolitical tensions

THE INTERNATIONAL ENERGY AGENCY (IEA) has followed OPEC’s lead by cutting its estimates of global oil demand growth this year and next by 100,000 barrels per day each. The agency cut its estimates of global demand growth to 1.3 million barrels per day for this year and 1.4 million barrels per day next year, citing currency depreciations, trade disputes, amongst other reasons.

It also estimated OPEC crude output had risen by 100,000 barrels per day in September to a one-year high of 32.78 million barrels per day.

Nigerian output was up, by 50,000 barrels per day, at 1.71 million barrels per day, its highest in over two years due to an accelerating loadings of premium crude, Qua Iboe, while Libyan output had also risen by 80,000 barrels per day to 1.06 million barrels per day in September, an over five-year high.

It also said that the trade wars, sanctions and others would put a strain on the market and the global economy as a whole, which would likely lead to higher prices.

With Brent crude prices now “established” above $80 per barrel, “expensive energy is back, with oil, gas and coal trading at multi-year highs, and it poses a threat to economic growth,” the IEA said.

The IEA also said in the current quarter, the world has reached its peaks for demand and supply by straining parts of the system to the limit,” adding that recent production increases come at the expense of spare capacity, which is already down to only 2 percent of global demand, with further reductions likely. This strain could be with us for some time and it will likely be accompanied by higher prices.”

Reflecting these new forecasts, the IEA cut its estimates for the “call” on OPEC crude, or need for OPEC production, reducing its call estimate for next year by 300,000 barrels per day to 31.6 million barrels per day and for the first quarter by 500,000 barrels per day to 30.8 million barrels per day.

It added that global oil supply was up 2.6 million barrels per day from a year earlier in September, led by North America and Russia, even as non-OPEC output dropped by 140,000 barrels per day in August due to seasonal reductions in Canada and Norway. US oil production reached a record-high 15.6 million barrels per day in July, up 2.4 million barrels per day year on year, while US offshore production in the Gulf of Mexico rose by 190,000 barrels per day to a recordhigh 1.85 million barrels per day, it said. The US “remains the engine of non-OPEC supply growth, propelled by expansions in the shale patch and rebounding output offshore,” the IEA report noted.