IEA: Oil outlook brightens as output disruptions erode surplus
LONDON (Reuters)
- Unplanned disruptions to oil output could help run down a global overhang of
unused crude this year, while demand will profit from growing gasoline
consumption, particularly in India and China, the International Energy Agency (IEA)
said.
The IEA said
output from non-OPEC producers is expected to fall by 800 Mbpd in 2016, an
acceleration from the agency's previous forecast for a fall by 710 Mbpd.
On the demand
front, the Paris, France-based IEA left its forecast for global growth broadly
unchanged at 1.2 MMbpd for this year, but said the risks to future forecasts
lay to the upside.
"Any
changes to our current 2016 global demand outlook are now more likely to be
upwards than downwards, as gasoline demand grows strongly in nearly every key
market, more than offsetting weakness in middle distillates," the IEA said
in its monthly Oil Market Report.
"Slower
demand growth in Organisation for Economic Co-operation and Development (OECD) countries
is not unexpected; it represents a return to the norm," it added.
This marks a
far cry from the IEA's warning at the start of the year that the oil market
could "drown in supply" in 2016, given the pace of stock-building and
the net rise in global production at the time.
The IEA noted
the warning last month from the International Monetary Fund, which cut its
global economic growth forecast in 2016 to 3.2 percent from 3.4 percent.
Yet robust
consumption in the likes of China, Russia and India in particular, could help
offset any declines stemming from a slowing economic backdrop.
"India
is the star performer: oil demand in the first quarter of 2016 was 400 Mbpd higher
year-on-year, representing nearly 30% of the global increase. This provides
further support for the argument that India is taking over from China as the
main growth market for oil," the IEA said.
OPEC pumps, rivals stall. On the supply side, the wildfire in the Canadian province of Alberta has taken more than 1 MMbpd of capacity offline in May, but the IEA noted outages in Nigeria, Libya, Venezuela and Kuwait, plus falling US shale output, have also eaten into global output.
The build in
global inventories of crude oil is expected to slow to just 200 Mbpd in the
second half of this year, from 1.3 MMbpd in the first half, the IEA said.
Benchmark
Brent crude prices have risen by 30% since the start of the year to above $45/bbl,
their highest since late 2015, buoyed by the extent of unexpected production
outages around the world.
But prices
have risen only about 12%, or $5, in the last month, when such interruptions
spread more widely, mainly because of the billions of barrels of unused crude
and refined products in tanks around the world.
"Further
oil price rises...are likely to be limited by brimming crude oil and products
stocks that will remain a feature of the market until more normal levels of
inventory are reached," the IEA said.
OPEC supply,
led by increases in Iran, Iraq and the United Arab Emirates (UAE), pushed the
group's output up 330 Mbpd in April to a seven-year high of 32.76 MMbpd, the
agency said.
The IEA added
that Saudi oilfields could ramp up towards 11 MMbpd "without strain,” from
current levels of around 10.2 MMbpd.
Iran, which
returned to global markets in January after the lifting of international
sanctions linked to its nuclear activities, increased production and exports
more quickly than expected, the IEA said.
Production
reached some 3.56 MMbpd, up 300 Mbpd and the highest since late 2011, prior to
the introduction of sanctions, the IEA said.
Loadings of
Iranian crude rose by 600 Mbpd in April to around 2 MMbpd, the IEA said, adding
that it was unclear how much of this oil had been drawn from onshore storage at
the Kharg Island hub.
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