Oil glut seen easing

Supplies of crude oil and demand for the stuff will strike a balance in the second half of this year, though there is concern over how much Britain’s decision to leave the European Union will impact the market, according to reports released earlier this month.

U.S. benchmark West Texas Intermediate crude oil futures are hovering near $45 per barrel, nearly 10% lower than before the U.K. voted to leave the EU.

Although crude oil prices remain weak, monthly reports from the International Energy Agency, OPEC and the Energy Information Administration say today’s oversupply situation will ease.

According to the IEA, the oil glut declined to 200,000 barrels per day in the April-June quarter from 1.3 million barrels at the start of the year as Canadian wildfires and armed militant attacks on oil facilities in Nigeria forced production cuts.

Tatsufumi Okoshi, senior economist at Nomura Securities, expects global economic growth, even at a low level and a U.S. production cut to result in a daily 200,000-barrel shortage in the July-September quarter. The EIA predicts that the U.S. will produce about 8.6 million barrels per day of crude oil this year, about 1 million barrels below its 2015 peak. Other oil-producing countries are only expected to boost output marginally.

The IEA’s Oil Market Report for July was upbeat, noting robust European petrochemical demand supported global demand growth in the April-June quarter. It also says demand will rise to 1.4 million barrels per day this year, a 100,000-barrel increase.

Takayuki Nogami, senior economist at Jogmec, the Japan Oil, Gas and Metals National Corp., said OPEC expects a daily shortage of a little more than 100,000 barrels next year.

Post-sanctions Iran, whose crude oil production has recovered to 3.6 million barrels per day, aims to boost that number to 4 million soon.

(Nikkei)