Global oil supply and demand were almost balanced in the first quarter this year
OREANDA-NEWS. Global oil supply and demand were almost balanced in the first quarter this year, with oil inventories increasing only by 100,000 b/d compared with the end of last year, according to the IEA. But "much work remains to be done in the second half of 2017" beyond the existing six-month production cut deal to bring inventories significantly lower, it said.
"Looking at the second quarter, if we assume that April's Opec crude oil production level of 31.8mn b/d is maintained and nothing changes elsewhere in the balance, there is an implied stock draw of 700,000 b/d. Adopting the same scenario approach for the second half of 2017, the stock draws are likely to be even greater," the energy watchdog said today in its monthly Oil Market Report (OMR). "Even if this turns out to be the case, stocks at the end of 2017 might not have fallen to the five-year average."
These assumptions suggest that the existing 1.8mn b/d oil production cut deal between Opec and some non-Opec producers would have to be extended by more than six months to bring inventories down to the five-year average. Russia and Saudi Arabia announced yesterday their support for a nine-month extension. And Opec's Monthly Oil Market Report (MOMR) last week indicated that the Opec secretariat believes the existing output cut needs to be extended for the market to rebalance by the end of the year.
"The call on Opec crude is expected to rise steadily and reach 33.4mn b/d during the final quarter of the year, implying sharp stock draws if output cuts were to be extended," the IEA said. It put its call on Opec crude at 31.8mn b/d in the first quarter and sees it at 32.6mn b/d in the second and at 33.2mn b/d in the third.
OECD commercial inventories decreased in March by 1.1mn b/d to 3.03bn bl compared with February, representing a second consecutive monthly fall after a sharp rise in January and taking the first-quarter increase down to about 300,000 b/d. The quarterly rise was almost fully offset by declines in "floating stocks and in other centres", the IEA said.
Preliminary data suggest an increase in OECD commercial stocks in April of 540,000 b/d, according to the IEA.
The IEA kept its 2017 demand growth forecast little changed, at 1.3mn b/d, despite cutting its estimates for first-half consumption growth by 115,000 b/d. The agency sees full-year demand totalling 97.9mn b/d.
"In addition to production cuts and steady demand growth, a major contribution to falling crude stocks in the next few months will be a ramp-up in global crude oil runs," the IEA said. "Starting in March, refinery activity is building up and by July global crude throughputs will have increased by 2.7mn b/d."
The IEA estimates global oil supply averaged 96.17mn b/d in April, down by 140,000 b/d on March and 90,000 b/d below a year ago, despite non-Opec production returning to year-on-year growth.
The agency sees non-Opec liquids supply growing by about 600,000 b/d this year to 58.3mn b/d, compared with its previous annual growth estimate of 490,000 b/d.