IEA: Oil market tightening has halted

By OGJ editors

Preliminary data for this year’s first quarter indicate that increased oil supply and sluggish demand imply a global build in oil inventories exceeding 1 million b/d, according to the International Energy Agency in its latest monthly Oil Market Report.

While data for the quarter suggest that total industry stocks within the Organization for Economic Cooperation and Development built by about 500,000 b/d, even if absolute stock levels in Europe and Asia remain below the 5-year average. And preliminary indications are that crude stockpiling by Saudi Arabia and China may amount to a combined 700,000 b/d for the first quarter, IEA said.

The stockpiling so far has been driven by concerns about supplies during the upcoming summer, after sanctions on Iran fully take effect. IEA said deliveries of Iranian crude to traditional buyers could drop by 800,000 b/d to 1 million b/d this summer, but key producers in the Organization of Petroleum Exporting Countries have already shown that they can replace lost volumes. Total OPEC oil output is near 31.5 million b/d, according to IEA figures, with Saudi Arabian production averaging 10 million b/d in February and March.

Oil demand

The Paris-based agency forecasts that global oil demand will average 89.9 million b/d in 2012, up from 89.1 million b/d from 2011. This forecast is unchanged from a month ago.

Demand growth in Asia continues to dominate, accounting for 700,000 b/d of the global 800,000 b/d of growth expected this year.

IEA said the only noteworthy change in demand from last month’s report is the stronger growth now foreseen in oil-rich regions such as the Middle East, now forecast at 205,000 b/d as opposed to 155,000 b/d last month, and the former Soviet Union, now seen climbing by 125,000 b/d, previously by 115,000 b/d. More price-sensitive regions, such as North America, where IEA forecasts that demand will decline by 229,000 b/d this year, correspondingly have had demand estimates revised lower.

US oil demand will average 18.69 million b/d this year, down from last year’s 18.9 million b/d, according to IEA.

EIA outlook

Earlier this week, the US Energy Information Administration, in its short-term energy and summer fuels outlook, forecast that US oil demand will average 18.7 million b/d this year, down from last year’s average of 18.84 million b/d. EIA expects that US demand in 2013 will rebound to the 2011 level.

During this year’s April-September summer driving season, regular gasoline retail prices will average about $3.95/gal, peaking in May at a monthly average price of $4.01/gal, EIA forecasts.

EIA also projects that worldwide oil demand will climb to average 88.81 million b/d this year and to 90.11 million b/d in 2013 vs. 87.92 million b/d last year.

OPEC’s monthly report

In addition, OPEC released its monthly Oil Market Report for April.

Projected worldwide oil-demand growth in 2012 remains at 900,000 b/d—with demand averaging 88.6 million b/d—as offsetting economic developments across the globe have left the forecast unchanged from the previous report, the report said. In its initial forecast for this year, OPEC had pegged global growth at 1.3 million b/d.

US oil demand remains a key uncertainty to the current demand assessment, and the upcoming driving season might be affected by high retail gasoline prices and the pace of the economic recovery. At the same time, improving consumption in Japan could positively impact world oil demand growth, OPEC said.

Output in North America will account for most of the forecast 580,000 b/d of non-OPEC supply growth this year, followed by supply from Latin America and the FSU, as total non-OPEC oil supply averages 52.97 million b/d, according to the report. Middle East supply is expected to experience the largest decline, followed by Africa and OECD Europe.

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