IEA says global oil
market nears balance even as stocks rise
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[April 13, 2017]
By Amanda Cooper
LONDON
(Reuters) - Global demand for oil is finally close to outstripping
supply after nearly three years of surplus production, despite growth in
the overhang of unused crude, the International Energy Agency said on
Thursday.
The agency said oil stocks across the Organization for Economic
Cooperation and Development (OECD) fell by 17.2 million barrels in
March. Over the first three months of the year, stocks were up by 38.5
million barrels, or 425,000 barrels per day (bpd), after a large
increase in January.
Overall, OECD stocks fell by 8.1 million barrels in February to 3.055
billion barrels as demand outpaced supply to the tune of around 200,000
bpd between January and March, the Paris-based agency said.
But stocks are still 330 million barrels above the five-year average, a
key indicator.
"There are several possible explanations for the discrepancy, e.g.,
demand is overstated or supply understated in our estimates. Another
potential explanation lies with 'less visible' stocks, including stocks
held at sea (either in transit or for speculative reasons) and on land
in countries outside the OECD," the IEA said.
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"Indeed, a look at data from various sources shows stocks drawing in
some non-OECD countries over (the first quarter of 2017). Non-OECD
stocks are thought to be roughly equal in size to OECD volumes, but
there is far less data available about them."
Analysts at Bernstein Energy said the coming quarter was a "make or
break" one for OPEC as the producer group fights to cut global
inventories back to their five-year average.
Demand for crude oil tends to decline in the first quarter of the year,
when refineries close for maintenance.
Also, the 60- to 70-day lag between exports leaving the Arabian Gulf and
arriving in major markets means the extent of OPEC supply cuts has yet
to bite. And while the group has reduced supply, it has increased
exports, Bernstein said.
"In other words, the full extent of the production cuts has not hit
yet," Bernstein said.
Most of the decline in non-OECD stocks likely came from Iran, where
inventories of ultra-light condensate had been held at sea since the
imposition of Western sanctions in 2012.
The IEA said Iranian offshore stocks fell to 4 million barrels in March
from 28 million barrels when sanctions were lifted in early 2016.
Globally, oil held offshore fell to 58.4 million barrels in March from
82.6 million barrels at the end of 2016, the IEA said.
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![](../images/041317PICS/busine61.jpg)
An oil pump jack pumps oil in a field near Calgary, Alberta, Canada
on July 21, 2014. REUTERS/Todd Korol/File Photo
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"The
net result is that global stocks might have marginally increased in the first
quarter, versus an implied draw of about 0.2 million barrels per day," the IEA
said.
"It can be argued confidently that the market is already very close to balance,
and as more data becomes available this will become clearer. We have an
interesting second half to come."
DEMAND OUTLOOK DIMS
The IEA trimmed its forecast for global oil demand growth in 2017 by 40,000 bpd
to 1.32 million bpd. It warned this could prove optimistic given slowing
consumption in the United States and developed Asian economies such as
Australia, Japan and South Korea.
"New data shows weaker-than-expected growth in a number of countries including
Russia, India, several Middle Eastern countries, Korea and the U.S., where
demand has stalled in recent months," the agency said.
On the
supply front, the agency said global production fell by 755,000 bpd in March to
95.98 million bpd as OPEC and its partners complied with their joint deal to cut
output by 1.8 million bpd in the first half of this year.
The Organization of the Petroleum Exporting Countries stuck to its pledge in
March, bringing compliance to a "robust" 99 percent, the IEA said.
The agency said non-OPEC signatories, including Russia and Oman, raised their
compliance rate to 64 percent, from 38 percent in February.
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The price of oil has doubled to around $56 a barrel from a 13-year low of
$27 hit in January last year, which has encouraged a raft of new supply.
For 2017, the IEA said it expects non-OPEC supply to rise by 485,000 bpd, above
its previous estimate of 400,000 bpd, led by increases in U.S. production
growth.
"Indeed, although the oil market will likely tighten throughout the year,
overall non-OPEC production, not just in the U.S., will soon be on the rise
again."
(Reporting by Amanda Cooper; Editing by Jason Neely and Dale Hudson)
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