World oil market begins to rebalance as supply growth eases – IEA
Saudi output eased in July, offsetting record high Iraqi production and increased Iranian flows
The oversupply of international oil markets – led by Saudi Arabia and OPEC – that is driving down oil prices will continue into 2016, according to a new International Energy Agency report.
The IEA’s Medium-Term Oil Market Report for July, released on Wednesday, raised its forecast of world oil demand growth in 2015 by 200,000 b/d to 1.6 million b/d, highlighting that OPEC will not back down from its drive to defend market share by maintaining output.
“Unlike earlier price drops, this one is both supply- and demand-driven, with record non-OPEC supply growth in 2014 providing only one of the factors behind it, unexpectedly weak demand growth another,” said the report.
World oil supply fell nearly 0.6 million b/d in July, mainly on lower non- OPEC output. OPEC crude production held steady near a three-year high. As lower prices and spending cuts take a toll, non-OPEC supply growth is expected to slow sharply from a 2014 record of 2.4 mb/d to 1.1 million b/d this year and then contract by 200,000 b/d in 2016.
OPEC crude supply inched 15,000 b/d lower in July to 31.79 million b/d as Saudi output eased and offset record high Iraqi production and increased Iranian flows. The ‘call on OPEC crude and stock change’ rises to 30.8 million b/d in 2016, up 1.4 million /d on this year due to a stronger demand outlook and stalling non-OPEC supply growth.
OECD inventories rose counter-seasonally by 9.9 million barrels to hit another all-time high of 2,916 million barrels in June with their surplus to average levels widening to a record 210 million barrels. As the seasonal restocking of ‘other products’ continued apace, refined products by end-month covered 31.3 million barrel days of forward demand, 0.2 days above end-May.
“[B]arring any unexpected supply disruption or major, energy-related change in policy, the market rebalancing will likely occur relatively swiftly but will be comparatively limited in scope, with prices stabilising at levels higher than recent lows but substantially below the highs of the last three years,” the report said.
Global refinery runs reached a record 80.6 million b/d in July, 3.2 million b/d up on a year earlier, but fissures are showing. High distillate stocks have pushed cracks in Singapore down to their lowest level since 2009 and prompted
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