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IEA Says Oil Market Could Tilt Into Deficit In 1H If OPEC Sticks To Cuts

IEA Says Oil Market Could Tilt Into Deficit In 1H If OPEC Sticks To Cuts thumbnail

Global oil inventories rose for the first time in January as the market grappled with a swell in production last year, but if OPEC maintains its output cuts, demand should overtake supply in the first half of this year, the International Energy Agency said on Wednesday.

The IEA’s monthly report struck a more bullish note than that issued by the Organization of the Petroleum Exporting Countries on Tuesday.

OPEC also flagged rising inventory levels, but raised its estimates for production outside the group and did not see a rebalancing between supply and demand until the second half of this year.

The IEA said crude stocks in the world’s richest nations rose in January for the first time since July by 48 million barrels to 3.03 billion barrels, more than 300 million barrels above the five-year average.

“The actual build in OECD stocks in January reminds us that it may be some time before global stocks start to fall,” the agency said.

The increase is the product of “relentless” supply growth in the latter stages of last year, particularly from OPEC countries that pumped at record levels, and from the U.S. shale oil basin, where drilling activity began picking up 10 months ago.

Compliance by OPEC with its agreed output cut of 1.2 million barrels per day in the first half of this year was 91 percent in February and, if the group maintains its supply limit to June, the market could show an implied deficit of 500,000 bpd, the IEA said.

“If current production levels were maintained to June when the output deal expires, there is an implied market deficit of 500,000 bpd for 1H17, assuming, of course, nothing changes elsewhere in supply and demand,” the IEA said.

“For those looking for a re-balancing of the oil market the message is that they should be patient, and hold their nerve.”

In its October report, before the November agreement between OPEC and some of its competitors including Russia, Mexico and Kazakhstan to limit output, the IEA warned the market risked running into a third successive year of excess supply without any action from the producer group.

Saudi Output Up, But No Quota-Busting

Within OPEC, Saudi Arabia has shouldered the burden of the production cuts, offsetting poorer compliance by other nations.

In February, Saudi oil production staged a monthly rise of 180,000 bpd, but at 9.98 million bpd, its output remained below its agreed target of 10.06 million bpd and, according to tanker-tracking data, Riyadh is focussing its cutbacks on North America, the IEA said.

“At 32.3 million bpd, the call on OPEC crude during the first quarter of 2017 is higher than average output of 31.9 million bpd so far this year, which could lead to a draw in global inventories,” the IEA said, adding that it was not clear if the group will extend its supply agreement.

“Beyond the nervousness about this legacy supply and concerns about rising production today from some non-OPEC countries; the implementation of the OPEC production agreement appears in February to have maintained the solid start seen in January.”

Saxo Bank senior manager Ole Hansen said the report did not rock the boat as the OPEC report did yesterday.

“As long as OPEC stays on track and non-OPEC delivers on their agreed cuts the market will continue to balance,” he said.

Beyond OPEC, oil production rose 90,000 bpd in February, as increasing U.S. output offset declines elsewhere.

Compared with last year, total non-OPEC supply was 285,000 bpd lower, of which the United States accounts for roughly half, the agency said.

“The recovery path of U.S. tight oil is key to rebalancing the oil market over 2017, so is the compliance of the 11 non-OPEC countries that agreed to curb output,” the IEA said.

The IEA left its estimate of global demand growth unchanged from its last report at 1.4 million bpd in 2017.

“The market is still dealing with a vast amount of past supply, which will take time to work its way through the system. Meanwhile, demand growth has not provided any further encouragement after three consecutive months when we upgraded our estimates,” the IEA said.

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14 Comments on "IEA Says Oil Market Could Tilt Into Deficit In 1H If OPEC Sticks To Cuts"

  1. Apneaman on Thu, 16th Mar 2017 7:14 pm 

    Australian Energy Market Explained-2:36

    https://www.youtube.com/watch?v=ELaBzj7cn14

  2. Apneaman on Thu, 16th Mar 2017 7:35 pm 

    I couldn’t agree more.

    White House: Climate funding is ‘a waste of your money’

    http://thehill.com/policy/energy-environment/324358-white-house-says-climate-funding-is-a-waste-of-your-money

    What’s the point of more research since the terminal diagnosis has long passed?

  3. bug on Thu, 16th Mar 2017 7:44 pm 

    Ape, bingo, the cake has been baked, it is gonna come no matter what the hairless monkeys do.
    Like a guy with 2 days to die from cancer wants to hear about a treatment years off.

  4. Nony on Thu, 16th Mar 2017 7:50 pm 

    short term focus

  5. GregT on Thu, 16th Mar 2017 10:11 pm 

    “short term focus”

    Describes you to a ‘T’ Nony. No consideration at all to the consequences of your cheerleading. Surprising, given that your life is likely to be affected much more so than us ‘old timers’.

  6. Nony on Thu, 16th Mar 2017 11:50 pm 

    You’re not really a peaker, Greg, you are an environmentalist. You aren’t worried that FF will run out. You are worried they won’t. I don’t share your feelings on greenie stuff, but I actually respect an enviro type more than a greenie.

    Just embrace the greenie part of you and admit the peakers were wrong on the amount of FF. Too much, not too little is the problem.

    P.s. nuke the whales! 😉

  7. Nony on Thu, 16th Mar 2017 11:51 pm 

    I actually respect an enviro type more than a peaker (meant to write)

  8. Apneaman on Fri, 17th Mar 2017 12:53 am 

    Nony says “Just embrace the greenie part of you and admit the peakers were wrong on the amount of FF.”

    So after however many years of arguing that’s your understanding of peak oil – the “amount” of oil in the ground?

    Well no wonder you’ve been so angry and frustrated nony, you don’t even understand the premise.

    As for greenies nony, to be an actual environmentalist one must do more than acknowledge there is a problem. To be an environmentalist one must make an effort to change, even if it’s just well to do green consuming and more importantly, advocate for change, like at rally’s and protests – join groups and all that good shit.

    You really struggle with the word definitions eh nony? I bet you got good grades at your American public school huh? Did your mommy put one of those bumper stickers on her car to brag you up?

    “My son is a honour student at Mouth Breather High”

  9. Northwest Resident on Fri, 17th Mar 2017 1:34 am 

    Hey GregT, you’re in trouble now:

    Deported Mexicans Vow To Flood Into Canada – Immigrating To “The U.S. Is Over…Now It’s Canada’s Turn”

    http://www.zerohedge.com/news/2017-03-16/deported-mexicans-vow-flood-canada-immigrating-us-overnow-its-canadas-turn

    When it comes to politics these days, especially in America, I don’t take anything at face value. Everybody who is anybody knows for a fact that economic collapse is imminent, underway already in fact and gaining momentum. The way I see it, the CEOs, the financial elites, elected officials, law enforcement, military, Homeland Security, CIA/NSA/ETC — they all know what is coming down, and they are all just playing their roles trying to keep a lid on things until they get the green light to head for their respective bunkers. The whole Trump extravaganza is just one big reality show production with a primary goal to so confuse, irritate, infuriate and incite the populace against each other that they remain oblivious to the real issues sneaking up on them.

    Hey, you asked! 🙂

    IEA supply and price predictions — always worth a laugh or two. But they do have their clueless and witless admirers.

  10. GregT on Fri, 17th Mar 2017 2:55 am 

    “P.s. nuke the whales!”

    I believe that it was actually ‘Nuke the Gay Whales’ Nony, but yes, you are correct. I don’t believe that we’ll run out of CO2 generating stuff to burn for quite some time. I do believe however, that we’re past the peak of the oily stuff that our economies, and first world lifestyles can afford. We passed a milestone in or around 2005. It’s all downhill from there. I’d be exploring different avenues for your future if I were you. But what do I know? You obviously have much more knowledge and experience than I do. 🙂

  11. GregT on Fri, 17th Mar 2017 3:17 am 

    Thanks for your reply NWR.

    “a primary goal to so confuse, irritate, infuriate and incite the populace against each other that they remain oblivious to the real issues sneaking up on them.”

    As always, completely agree. Divide and conquer. Same as it ever was. No point in changing tactics when they continue to work so well.

    On a lighter note, those Mexicans are in for a big surprise, we’ve been training our deer on facial recognition. Mexicanos don’t stand a chance.

  12. Davy on Fri, 17th Mar 2017 4:50 am 

    Nony, I respect and enjoy your great market insider news. You give a deeper understanding to what is going on beyond where Rock leaves off with production. This is important because it is the reality of the heartbeat of the industry and the markets thereafter. This market insight is valuable to me and others here and I am glad you are back from your leave of absence.

    I will disagree with you on peak oil though. Peak oil today is more than just supply reaching a peak in terminal decline it is also about economic oil and demand destruction. I have come a long way in my peak oil journey from seeing an imminent supply crisis a few years back with both oil and gas to now seeing there is ample supply of hydrocarbons and the means to get it. The change in me is now related to a consciousness of demand destruction that is coming from systematic decay of the global economy and other decay elements of which peak oil dynamics is one. The declining planetary system, disrupted climate, and overpopulation are the others.

    Oil is not economic like it once was. Our modern civilization is in its late stages of growth where limits of all kinds and diminishing returns conspire to destructively change physical infrastructure, abstract networks and social fabric. Our oil situation may not be one of running out of supply but we are running out of economic oil at a time when our global economy is demanding more economic energy. We are in the zone of an intersecting trends. More expensive oil and a global economy in a stagflation decline.

    Our global civilization is growth based. This growth basis is debt and investment driven. These investments are social and economic. On all counts we are in decline with our investments. Liabilities are going unfunded and needed infrastructure not invested in. Our debt is building to a point of paralysis. We are long past the point of no return to debt. It is now a ticking time bomb. Oil is part of this and wrapped up with it. Oil production is not being invested in as it should. Oil based economies are failing because of this decline representing failed state risk. This will only deteriorate as the global economy collapses in on itself in stagflation with lower demand growth and eventually actual demand destructive degrowth.

    Your shale revolution is not going to power the world. It is doing wonders now maintaining supply but it will not fill in the holes that develop as legacy fields deplete. It is a scale thing also. Shale will never scale up globally in time, volume, and economics to counter this. This is a great thing now from a supply point of view but it is likely temporary. Arctic oil and ultra-deep water oil is likewise not going to happen in time. Renewables will not scale up in time or amount to change this trajectory. We are going to see less investment liquidity and pressure on the cost of money that will come to bear on shale and these other future sources.

    You can look at things for the old cornucopian/peakiest mentality if you like. You can crow and clap your hands but what good is that if the Ponzi is unraveling and the house of cards tumbling. You can be direct and say you don’t care about that you care about the old peak oil debate. You can say you won that debate with shale through technology. You can say that as your life becomes less affluent and more dangerous. You can feel like a winner as you lose your life as you know it. Great to win but you don’t get a prize you kick a kick in the ass.

  13. Revi on Fri, 17th Mar 2017 4:56 am 

    This Nony is some kind of an evil troll. Please don’t encourage him.
    The fact is that we can have an excess of fossil fuel, and be peaking at the same time. When there is not a price for a commodity it is a big problem. The stuff piles up for a while until it all gets sold at bargain prices. Then there’s not as much coming down the pipe, and not as much was made because there was no price signal. That’s capitalism…

  14. Davy on Fri, 17th Mar 2017 5:10 am 

    Revi, come on, just because you don’t like what he says does not mean it is not relevant. Nony is much more respectful and articulate than many others here who want to attack and use foul language. Is that OK for you because that is what you want to hear? Nony tells it like it is and he deserves recognition for some winning debates. He is an expert in is narrow field and we need more experts here. Calling him an evil troll is wrong. If you are going to step to that level then why not call makat one. His whole existence is based on hate and discontent directed to the US and the west. How is that not being an evil troll? He has no respect for others here that are American and western. He is pulp fiction for the anti-Americans hypocrites.

    I am encouraging anyone here who has insight on the truth to deliver. I don’t care if it is not what I want to hear. If it is the truth then so be it. The truth is not always clean per our irrational human understanding. Peak oil and climate change can be packaged so clean when the reality is completely different. The truth does not follow human reason. Nony is a great asset in my book.

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