The International Energy Agency said on Tuesday that the world’s oil stockpile was much lower than it previously thought, due to stronger-than anticipated demand.
After a strong first quarter for world oil demand, the Paris-based rich consumer countries’ energy watchdog said it now expects demand this year to be 100,000 barrels per day higher than it previously forecast, at 1.3 million bpd.
Also, in its first forecast for next year, the IEA said it expects the same rate of increased demand – 1.3 million bpd – with a relatively small increase in oil supply from producers outside of Opec, of about 200,000 bpd.
The IEA had estimated at the start of the year that the supply glut would continue to grow in the first half by 1.5 million bpd.
Looking back, “it looks as if the figure is about 800,000 bpd”, the IEA report said. “Between January and today, two main factors have transformed the outlook: first, oil demand growth has been significantly stronger than we expected … The second main factor to transform the outlook has been unexpected supply cuts.”
The demand side was helped by much stronger petrol consumption in the US, which helped turn marginally declining in the prior five months to strong growth of 400,000 bpd year-on-year in the March-to-May period, the report said.
Next year, India’s forecast demand growth of more than 8 per cent, together with China’s slower but still significant 3.3 per cent growth is expected to keep demand growth steady.
On the supply front, the first half of the year saw Canada’s wildfires removed up to 1.5 million bpd of production capacity, while the political-related disruptions in Nigeria has forced output to a 30-year low.
Nigeria’s troubles – as well as those in fellow Opec member Libya – look long-term, the IEA said, while non-Opec countries will see production continue to fall by an average 900,000 bpd this year, including 500,000 bpd for US shale output.
The IEA warned, however, not to expect surging oil prices because of the prolonged period of overproduction that preceded the recent recovery.
“Following three consecutive years of stock build at an average rate close to 1 million bpd, there is an enormous inventory overhang to clear,” the report noted. “This is likely to dampen prospects of a significant increase in oil prices.”
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