Not even the latest from Iran could sway Wednesday trading: File Image/Pixabay
The world's crude supplies have diminished, and demand is expected to follow suit: those are the contentions in the latest report released Wednesday from the International Energy Agency, which downwardly revised last year's growth estimate by 70,000 barrels per day (bpd) to 1.2 million bpd, and anticipates that this year's cut will be 90,000 bpd for a total of 1.3 million bpd.
By contrast, the IEA believes non-Organization of the Petroleum Exporting Countries (OPEC) supply is forecast to grow only 1.9 million bpd versus 2.8 million bpd last year, with U.S. output expected to increase by 1.7 million bpd for 2019 compared to a record 2.2 million bpd last year.
The IEA also noted that the plunge in supply from Iran due to the U.S. sanctions has "created scope for other producers to raise supply" and cited Saudi Arabia, Iraq, Russia, and the United Arab Emirates as the most likely candidates.
Neil Atkinson, International Energy Agency
The market remains focused on the underlying fundamentals
Other crude news on Wednesday included Iran officially ending its commitment under the 2015 nuclear deal to cap enriched uranium and heavy water production - which means the Islamic republic could be one year away from being able to make weapons-grade plutonium, according to experts.
Another potential source of concern for the crude market was news from the Energy Information Administration that U.S. stocks swelled last week by 5.4 million barrels, contrary to analysts who had expected a decrease of 800,000 barrels.
Yet, despite the IEA downgrades and Iran being but one example of geopolitical tensions, crude prices on Wednesday withstood the pressure, with West Texas Intermediate settling 24 cents higher at $62.02 per barrel and Brent rising 53 cents to $71.77 per barrel.
This didn't surprise Neil Atkinson, head of oil industry and markets division at the IEA: he told Bloomberg television that thanks to constant reporting of problems in Iran, Venezuela, China (via the U.S. trade talks) and other issues, the market is becoming desensitized: "The market remains focused on the underlying fundamentals."
As for his agency downgrading demand, he pointed out that it was "fairly modest in reaction to some slightly weaker data" and that demand overall "will remain relatively robust."