Increasing Asian demand and world-wide disruptions to oil production could eat away today’s oil glut by the end of 2016, the International Energy Agency said Tuesday.
In its monthly report, the IEA said oil-production outages world-wide cut global supply by nearly 800,000 barrels a day in May, the first significant drop since early 2013.
But the IEA warned that the surplus could reappear in the second half of next year.
In the first quarter of 2016, global oil demand was 1.6 million barrels a day, the IEA said, raising its earlier estimate. It boosted its demand forecast for the rest of the year to 1.3 million barrels daily, up from 1.2 million in its May forecast.
It also changed its outlook on the global oversupply that has driven oil prices down more than 50% since 2014. “Less oil has been stockpiled than we originally expected,” the report said, lowering its estimate of global oversupply in the first half of 2016 from 1.5 million barrels a day to around 800,000.
That is due partially to production outages in Nigeria, where attackers have blown up oil installations in recent weeks, negating supply increases in other member states of the Organization of the Petroleum Exporting Countries.
The IEA said it also expects non-OPEC production to fall by 900,000 barrels a day this year from last year, to 56.8 million barrels a day. The decline is due in part to wildfires that have devastated Canada’s oil sands. The IEA said non-OPEC oil production fell by more than 650,000 barrels a day last month from a month earlier to 55.9 million barrels a day. It forecast non-OPEC supply to rise 200,000 barrels a day in 2017, mainly as halted production from Canada and Brazil returns.
The agency said it expects global demand to grow next year by 1.3 million barrels a day to 97.4 million barrels a day. But it said that production recovery in Canada, Nigeria or Libya could further drive supply up and prices down.
U.S. shale production will decline next year, the IEA forecast. This year’s average daily output of about 3.8 million barrels is down more than 500,000 barrels from last year, the IEA estimates. It predicts a further fall of about 190,000 barrels in 2017.
OPEC, which pumps about a third of the world’s crude, saw its output fall by 110,000 barrels a day in May to 32.61 million barrels. But OPEC member Iran saw output rise by 80,000 barrels a day to 3.64 million barrels—the highest since June 2011.
Commercial stocks of oil in OECD countries increased by 14.4 million barrels from March to the end of April and stood at just over 3 billion barrels, up by 222 million barrels compared with a year earlier.
By Summer Said
Source: Wall Street Journal
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