EMEA News
Global Oil Supply and Demand Will Soon Get "Very Close to Balance": IEA
The Organization of the Petroleum Exporting Countries' (OPEC) production output is up due to Iran, non-OPEC output is down due to less U.S. shale production, but the International Energy Agency says the global oversupply of crude will nonetheless soon shrink.
IEA states in its latest oil market report that the long-awaited rebalance of supply and demand is becoming more evident, with surplus possibly shrinking later this year.
The agency notes that falling non-OPEC supply and rising demand, which it pegs at between 1.2 and 1.4 million barrels per day (bpd) with India representing nearly 30 percent of the global increase, could cause oil stock growth to decline in the latter half of 2016, which in turn would facilitate the surplus shrinkage and eventually bring stability to prices: "We expect to see global oil stocks increase by 1.3 million bpd in the first half of 2016, followed by a dramatic reduction in the second half of 2016 to 0.2 bpd."
Another indication that global surplus will shrink dramatically is the decline for the first time in a year in February of oil stocks in the Organization for Economic Co-operation and Development, which includes most European nations, Australia, and the U.S.
Neil Atkinson, head of oil industry and markets for the IEA, also told CNBC that "The market is very forward-looking and as it looks through the second half of 2016 and into the early part of 2017 there is a growing expectation that the market will, if not actually balance, certainly get very close to balance."
However, he added that the enormity of the oversupply is such that "There's a big buffer or big dampener on prospective rise in oil prices by the fact that these enormous stocks do exist and will exist for some time to come."
Meanwhile, IEA data shows that Iranian exports increased at greater rate than expected, to about 2 million bpd in April, possibly helped by loadings that spilled over from March; nonetheless, the output matches that of pre-sanction levels.
The agency predicted that non-OPEC production will decline by 800,000 bpd this year, compared to its previous forecast of 710,000 bpd; the Canadian wildfires will cause output to drop further, it added.
In March, Energy Aspects Ltd. calculated that it won't be until 2021 before accumulated global stockpiles will be cleared and a true market recovery will commence.
