IEA: MORE OIL SUPPLY NEEDED IN 2H TO KEEP OIL PRICES STABLE
PARIS (MktNews) - "Significantly more oil" than foreseen in the higher OPEC production targets will be needed in
the second half of this year to meet expected demand growth and keep prices stable, the International Energy Agency
said Tuesday.
While "OPEC appears to have engineered a relatively 'soft landing' for crude oil prices," nearly one million more
barrels per day will be needed in the second half to satisfy the expected rise in demand, of which 220,000 b/d would
go for stock building, the IEA forecast in its Monthly Oil Report.
"The imbalance in the fourth quarter could grow to over 2.3 million barrels per day (mb/d) -- 2.1 mb/d to balance
(demand) and 200,000 to put back the last of the stocks needed to reach even last year's low end-December levels," it
warned.
Thanks to higher OPEC output, "a moderate second quarter stock build is now expected," the report said. Though
OECD industry stocks declined by 800,000 b/d in February, stocks rose 400,000 b/d in January, the IEA said, a
sharp revision from its previous estimate of a January drawdown of the same amount.
Along with the decline in oil prices, the forward price curve are flattening, encouraging refiners to increase
throughputs, it noted.
"But can refiners replenish stocks fast enough, especially with differing specification changes in the U.S. and Europe,
to avoid problems in meeting the growing demand for gasoline this summer?" it asked rhetorically.
While OPEC's Vienna production accord of March 29 would increase output targets by de facto 1.72 mb/d, the
actual increase "will be less, as the OPEC 10 (OPEC excluding Iraq) were already producing 1.25 m/d above targets
in March, the report said. Iran did not take part in the production agreement but said it would raise output, as well.
Although the expected increase in global demand this year has been revised down by 0.2 mb/d from the previous
month estimate, it is still expected to average 76.7 mb/d, or 2.1% (1.6 mb/d) higher than last year.
Thus, with higher demand this year and actual increase in OPEC oil production lower than the nominal target, "the
second half of the year will need to see higher production," the report said, adding that "the allocation among producers
may be difficult, given capacity constraints in several producing countries."
While the report mentioned a better outlook for coming months, oil markets "will be increasingly vulnerable to
unplanned refinery outages."
OPEC crude supply fell by 210,000 b/d in March, "pulled down by sharply lower Iraqi output." Excluding Iraq,
OPEC production totalled 24.37 mb/d, representing 1.25 mb/d of non-compliance with the previous cutback targets,
the report said.
The IEA revised down its overall oil demand forecasts for the first and second quarters by 600,000 b/d and
100,000 b/d, respectively. Demand in the second quarter will still be 2.8% higher than a year ago. "If prices moderate
and product price backwardation eases, it will make economic sense to rebuild secondary and tertiary stocks,
supporting oil demand growth," the report commented.
The agency revised up its non-OPEC supply forecast for this year by 200,000 b/d, giving a full-year projection of
45.8 mb/d, "mostly from the U.S. and Russia." Revisions are spread throughout the year.
The expected call on OPEC crude plus stock changes was revised down by 400,000 b/d this year to 28.1 mb/d. |
