Oil demand growth seen slowing for a second year

Apr 14, 2017, 10:42
Oil demand growth seen slowing for a second year

In its monthly Oil Market Report for April released Thursday morning, the International Energy Agency (IEA) said that global crude supplies fell by 755,000 barrels per day in March, primarily due to lower output from both OPEC and non-OPEC producers.

The Paris-based IEA, which advises industrial nations on energy policy, said on Thursday supply and demand in the global oil market was close to matching after a fall in stockpiles in developed countries in March.

The compliance rate with the agreement among OPEC members and some non-members, including Russian Federation, "has been impressive", the International Energy Agency (IEA) said in its monthly oil market report, giving a lift to oil prices. This would provide further support to prices, which in turn would offer further encouragement to the United States shale oil sector and other producers. While "this might be surprising as it comes after the implementation of Opec output cuts", it reflects the group's export surge late previous year.

Non-OPEC producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017 for six months, extendable for another six months.

It estimates that Opec crude output fell by 365,000 bpd last month to 31.68 million bpd, with Saudi Arabia cutting by more than it has pledged, while Nigeria and Libya, which are exempt from cutting, have had further disruptions to their production. The agency lowered estimates for global demand growth because of weaker-than-expected economic activity in India and Russian Federation.

The IEA projects global demand growth of 1.3 million barrels a day for 2017, down from 1.4 million barrels a day in the report for February.

"The net result is that global stocks might have marginally increased in the first quarter, versus an implied draw of about 0.2 million barrels per day", the IEA said.

World benchmark North Sea Brent crude futures were up 10 cents at US$55.96 a barrel in afternoon trading Arabian Gulf time. The report predicted a drop to 3.7 mill barrels per day by 2022, compared with 4 mill barrels per day in 2016. The market had climbed to a one-month high of $56.65 on Wednesday before losing ground.

Stockpiles will decline by about 1.2 million barrels a day in the second quarter if the group maintains current output levels, and by 1.6 million a day if it extends the curbs into the second half, the IEA's data indicates.