The International Energy Agency warned Thursday that the oil market is entering a “very crucial period” due to uncertainties over Libya and Venezuela and Iranian sanctions, and said demand in non-OECD countries was proving mostly resilient to currency depreciations.
In its monthly oil market report, the IEA highlighted Venezuela’s continuing decline, this week’s attack on the headquarters of Libya’s NOC, and a sharp reduction in Iranian output ahead of the reinstatement of US sanctions on November 4.
And it nudged higher its estimates of the “call” on OPEC, or need for OPEC crude, for the fourth quarter of this year and Q1 next year, to 32.8 million b/d and 31.3 million b/d respectively, while keeping its annual estimates unchanged.
“The situation in Venezuela could deteriorate even faster, strife could return to Libya and the 53 days to 4 November will reveal more decisions taken by countries and companies with respect to Iranian oil purchases.
It remains to be seen if other producers decide to increase their production. The price range for Brent of $70-$80/b in place since April could be tested,” the IEA said.
It estimated Iran’s crude production had fallen by 150,000 b/d to a 25-month low of 3.63 million b/d in August. Offsetting the worries over OPEC, the IEA said Iraqi production had jumped by 90,000 b/d in August, and with Iraqi exports running at nearly 4 million b/d it had shipped more crude than Iran had produced, this despite an upsurge of public unrest in the southern oil hub of Basra.
Basra crude exports had reached a record-high 3.58 million b/d, close to the 3.7 million b/d capacity of Iraq’s southern export terminals.
OPEC crude output rose to a nine-month high of 32.63 million b/d in August, helped by a rebound in Libyan production, which however remains unpredictable in the light of Monday’s events in Tripoli, where the head of NOC, Mustafa Sanalla, at one point had to be evacuated from the headquarters building due to a rebel attack. Libyan “supply remains vulnerable to disruptions due to ongoing unrest and security issues,” the IEA said.
Elsewhere, the IEA predicted an eventual rebound for Brazil, although the country’s production is falling well short of expectations, and is now expected to rise by just 30,000 b/d this year, to 2.77 million b/d. The growth spurt from Brazil’s pre-salt fields has been offset by decline at onshore legacy fields.
“A rebound is in sight… with Petrobras and its international partners starting up seven new production systems this year followed by another two during 2019,” the IEA said.
NON-OECD DEMAND STRENGTH
On the demand side, the IEA raised its estimate of China’s oil demand growth this year to 640,000 b/d, from 490,000 b/d in its previous report, and said non-OECD demand was by and large proving “resilient” in the face of currency depreciations, though there are risks to that view.
“Non-OECD demand has so far been resilient in the face of significant currency depreciations in some countries that amplify the effect of higher dollar oil prices and deterioration in the economic environment. Non-OECD Asia oil demand, supported by China and India, is expected to post strong growth in 2018 and 2019,” the IEA said.
On oil stocks, the IEA said OECD stock levels had risen by 7.9 million barrels in July to 2.824 billion barrels, the fourth monthly increase in a year, but still 50 million barrels below the five-year average.
It said preliminary data pointed to a “significant” stock build for the US and Japan in August, accompanied by a fall in European stocks. The IEA trimmed its estimate of non-OPEC supply growth next year to 1.84 million b/d, from 1.85 million b/d in last month’s report, while maintaining its estimates of global demand growth at 1.4 million b/d this year and 1.5 million b/d next year.
It also estimated that global oil supply, including natural gas liquids and biofuels, hit a record-high 100 million b/d in August. Platts
