Oil markets are tightening, as stockpiling gradually slows and inventories start to draw in the second half of 2016, the International Energy Agency forecast in its most recent monthly Oil Market Report.
“Notable builds are still anticipated, but will be significantly lower than during the previous six quarters up to the second quarter of 2015 when global stocks rose by a notional 715 million b/d,” IEA said.
In this report, IEA said it expects global oil demand growth to climb to a 5-year high of 1.7 million b/d in 2015 before moderating to 1.4 million b/d in 2016, thanks to lower oil prices and a strengthening macroeconomic backdrop. These estimates are 210,000 b/d and 200,000 b/d, respectively, above last month’s report.
“Higher estimates for 3Q15 demand, 400,000 b/d higher at 95 million b/d, were chiefly attributable to raised July numbers for the US, China, Europe, and Russia,” IEA said.
Russian demand beat earlier expectations due to industrial-stimuli provided by recent currency weaknesses, offsetting to a greater degree the negative impact from otherwise contracting Russian macroeconomic activity.
Despite recent concerns regarding the strength of the economy, Chinese oil demand growth has shown persistent gains as strong growth in the petrochemical and transport sectors, outweighs any apparent weakness in industrial oil use.
EIA expects Chinese oil production demand growth to remain relatively muted at 3% in 2016, at least until more clarity emerges with regard to the success of government efforts to support continued macroeconomic growth.
Global oil supply fell 600,000 b/d in August from a month earlier to 96.3 million b/d on lower output in both the Organization of Petroleum Exporting Countries and non-OPEC countries. Supplies nevertheless stood more than 2.4 million b/d above a year earlier, with non-OPEC producers accounting for 43% of the gain.
According to IEA data, non-OPEC production declined 350,000 b/d in August to 58.16 million b/d. “The decline was led by the US, which based on preliminary data saw accelerating declines from recent highs, and lower North Sea volumes, curbed by seasonal field maintenance,” IEA said.
The plunge in global crude prices is expected to cut non-OPEC oil production by nearly 500,000 b/d next year, a drop in output largest since 1992, on a sharply weaker outlook for US supply, lower Russian output and structural declines in the North Sea.
OPEC crude supply fell 220,000 b/d to 31.57 million b/d in August, led by losses in Saudi Arabia, Iraq, and Angola.
“OPEC’s two largest producers, Saudi Arabia and Iraq, posted month-on-month declines, but continued to pump near record rates—leaving overall OPEC crude output roughly 1.2 million b/d higher than a year ago,” IEA said.
OECD stocks, refining
Commercial oil inventories from members of the Organization for Economic Cooperation and Development followed seasonal trends to add 18 million bbl to end July at a record 2,923 million bbl. As refinery throughputs hit a seasonal high, crude oil inventories drew by 9.9 million bbl while refined products added 26.7 million bbl.
Preliminary data suggest that OECD inventories rose seasonally by a further 13 million bbl in August after a steep 16.9 million bbl build in the US, centered in refined products, more-than-offset counter-seasonal draws elsewhere.