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ENERGY-OIL-IEA
IEA sees ample oil supplies and weak demand
PARIS, June 14, 2019 (BSS/AFP) – Tepid growth in demand for oil along with
ample supplies from non-OPEC countries will complicate efforts by the cartel
and its allies to boost prices, the IEA said in a report Friday.
The focus in oil markets in recent months and days has been on supply
issues — from US sanctions on Iran and Venezuela to tanker attacks near the
Strait of Hormuz — which has helped OPEC and its allies, which are often
called OPEC+, in their efforts to prop up prices by cutting back output.
But the International Energy Agency said that now “the main focus is on
oil demand as economic sentiment weakens”.
It cited data that world trade growth has fallen to its lowest level since
the financial crisis a decade ago amidst the burgeoning US trade wars, which
have already begun to have an impact on demand for oil.
In the first three months of this year global demand for oil rose only by
a meagre 300,000 barrels per day, the lowest quarterly increase in nearly
eight years.
While there were some idiosyncratic factors such as weather, the IEA said
“the worsening trade outlook (was) a common theme across all regions.”
The IEA cut its forecast for oil demand growth this year for the second
month straight and trimmed its second quarter forecast as well.
While in its first estimates for 2020 the IEA sees oil demand
accelerating, this is more than matched by output gains from nations outside
OPEC+.
It put the increase of non-OPEC supplies at 2.3 million barrels per day
(mbd) in 2020 while global demand is seen as increasing by 1.4 mbd. In 2019,
the 1.9 mbd increase in non-OPEC supplies is also expected to outweigh the
1.1 mbd increase in demand.
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ZCZC
BCN-19
ENERGY-OIL-IEA 2 LAST PARIS
– ‘Welcome news for consumers’ –
“A clear message from our first look at 2020 is that there is plenty of
non-OPEC supply growth available to meet any likely level of demand…” said
the IEA.
“This is welcome news for consumers and the wider health of the currently
vulnerable global economy, as it will limit significant upward pressure on
oil prices,” said the Paris-based institution that provides advice to oil-
consuming nations.
The data comes as ministers from the OPEC+ nations are due to meet later
this month to debate whether to continue their production restraints.
With the IEA saying its forecast “means the tightening of oil markets
could prove short lived”, OPEC+ nations may have to consider stepping up
their cuts to maintain leverage on prices.
While the IEA added the caveat that its outlook assumes no major
geopolitical shock, it also noted that OPEC countries have ample spare
production capacity thanks to the cuts they have implemented.
The IEA’s latest monthly report comes a day after attacks on two tankers
in the Gulf of Oman, which caused oil prices to briefly shoot more than four
percent higher, in the second spate of incidents in a month in the strategic
shipping lane.
With some 40 percent of the world’s seaborne oil passing through the
Strait of Hormuz, a disruption to shipping could roil markets.
The attacks come amid rising tensions between Tehran and Washington as the
US has intensified sanctions on Iran over its nuclear programme.
The IEA said that the US sanctions have not yet completely cut off Iranian
oil exports, but they have fallen drastically.
Iran’s crude production fell 210,000 barrels to 2.4 mbd in May when
exports plunged by 480,000 to 810,000 barrels per day as Washington pulled
the last waivers for other nations to buy Iranian oil. That export level is
less than a third of what it was exporting a year ago.
The IEA added it was becoming increasingly difficult to determine where
Iranian oil was being shipped as Iran’s national oil company shut off
satellite tracking systems on its ships.
BSS/AFP/HR/1420