Asia/Pacific News
IEA: Oil Prices Will Stall at $50, But Demand to Increase Followed By Return to Surplus In 2017
Stressing that a "huge number of moving parts will see us amend our numbers accordingly," the International Energy Agency (IEA) in its latest monthly report says oil prices won't rise much higher than current levels as supply and past inventories remain high, but demand is steadily rising.
Even so, and despite declaring that the global market is nearing re-balance (which it admits could be thwarted if Canada, Nigeria, and Libya resume normal production), the IEA predicts a surplus will re-emerge next year.
The report revises its May forecast of 1.2 million barrels per day (bpd) by stating that demand growth in 2017 will likely increase by 1.3 million bpd, the same rate as this year, to 97.4 million bpd.
Most of the anticipated growth is expected to come from non- Organization of the Petroleum Exporting Countries members such as India, which it describes as the "world's growth leader".
The IEA predicts consumption in the second half of this year will swell by 8.3 percent compared to the same period last year, while China's demand will rise by 3.3 percent.
The IEA stated that while U.S. shale production will begin to recover in mid-2017 and production outside OPEC will grow by a modest 200,000 bpd, global inventories will decline by 100,000 bpd through the year.
This means that OPEC will have to provide an average 33.4 million barrels a day in 2017, about 800,000 more per day than it pumped in May, to meet overall demand, according to the report.
As for tilting back into surplus next year, the report states, "We expect to see global oil stocks build slightly in the first half of 2017 before falling slightly more in the second half of 2017; for the year as a whole, there will be a very small stock draw of 0.1 million bpd."
Oswald Clint, analyst for Sanford C. Bernstein, says, "This is another bullish IEA report [pointing to a] clear light at the end of the tunnel and oil prices well above current levels" - even though the IEA strongly suggests that for the time being at least, prices will hover at the $50 level.
Earlier this week, Francisco Blanch, head of global commodities and derivatives research at Bank of America Merrill Lynch, named India along with Turkey and the Philippines as "the new sultans of swing" that would determine global demand in the near future.
