IEA sees oil market close to balance in 2H: Update
"Our outlook suggests that after a big build-up of stocks in the first half of 2016 of 1.5mn b/d, the surplus will fall to 200,000 b/d in both the third and fourth quarters," the energy watchdog said in its April Oil Market Report (OMR).
Meanwhile, if leading oil producers decide to freeze — rather than cut — output at a Doha meeting on 17 April, the impact of such a decision on physical oil supplies will be limited, the IEA said.
"With Saudi Arabia and Russia already producing at or near record rates and very little upside seen apart from Iran — which has vowed to ramp up production to a pre-sanctions level of 4mn b/d — any deal struck will not materially impact the global supply-demand balance during the first half of 2016," the IEA said.
The agency kept its key supply and demand projections almost unchanged this month. It sees global oil demand rising by 1.2mn b/d this year compared with 1.8mn b/d in 2015, to 95.9mn b/d, with signs that "India could be replacing China as the main engine of global demand growth". Non-Opec supply is projected to drop by 710,000 b/d compared with last year, to 57mn b/d, with "signs that the much-anticipated slide in production of light, tight, oil in the US is gathering pace".
"By early April the rig count had fallen by nearly 80pc from the peak seen in October 2014, and more anecdotal evidence is emerging of financial problems taking their toll on the shale pioneers," the IEA said.
The IEA expects US liquids production to fall by 480,000 b/d in 2016 from a year earlier, as "higher Gulf of Mexico and NGL output provide a partial offset to declines in onshore crude oil production". The watchdog lists China, Mexico, Colombia and Kazakhstan as the countries with "notable" declines. It expects output gains in Russia, Canada, Brazil and Congo (Brazzaville).
"Within the group of non-Opec producers there are few areas of growth, with only a handful of countries likely to increase production this year, unless Russia, which has surprised us all with continued growth in production, does not carry out its professed support for a production freeze," the IEA said.
The watchdog's "conservative scenario" for Opec crude this year sees the group's output at 32.8mn b/d in the second quarter and 33mn b/d in the third and fourth quarters, compared with 32.6mn b/d in January-March. It sees call on Opec crude at 32.1mn b/d in 2016, compared with 30.4mn b/d last year. Opec's own estimate yesterday for 2016 stood at 31.5mn b/d.
The IEA said that "the pace of Iran's return to the market is more measured than some expected, but production in March was still nearly 400,000 b/d higher than at the start of the year".
The IEA estimates that commercial stocks in developed economies increased counter-seasonally by 7.3mn bl in February to 3.06bn bl. "Accordingly, the overhang of inventories against average levels widened to 387mn bl" at the end of February, it said.