IEA Update | Russell T. Rudy Energy LLC
“World Oil” reports that the International Energy Agency (IEA) now predicts global supply and demand being almost in balance by the end of this year. The current oversupply is much smaller than originally estimated, production is lower than anticipated, and demand stronger.
The Agency now sees the global oil glut as about 40% smaller than a month ago, but contends that an “enormous inventory overhang” still exists. While this surplus will moderate price increases, the market looks to be balancing.
In the first half of 2016 , the IEA projects supply outpacing demand by 800,000 barrels of oil per day (bopd). While this is significant, it is far less than the Agency’s prediction last month of a surplus of 1.3 million bopd for the same period.
Production is down as well. Wildfires in Canada, sabotaged pipelines in the Niger River Delta, and reduced investment in U. S. shale have all resulted in less oil supply than originally forecast.
The IEA raised its estimate for 2016 demand by 100,000 bopd based on stronger than anticipated fuel consumption in the U. S.
The IEA now predicts that global demand will increase by 1.3 million bopd this year, with the same level of increase in 2017. Non-OPEC production is expected to grow only slightly in 2017 with a projected increase of only 200,000 bopd, primarily from Canada and Brazil.
With demand projected to increase more than non-OPEC production, the difference will have to be made up by OPEC. This would require an increase of 900,000 bopd over May 2016 levels. Iran, whose production is increasing faster than any other OPEC member, is the likely source of much of this and might boost output to 3.7 million bopd next year.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/6/14/iea-cuts-estimate-of-oil-oversupply-sees-market-balance-in-2017 .
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