IEA REVISES UP OIL DEMAND ESTIMATES, SEES LARGE 3Q STOCK DRAWDOWN
marketnews.com
06:22 EDT 07/09
PARIS (MktNews) - The International Energy Agency revised up its estimates of world oil demand in the second and third quarters this year due to stronger demand in Asia, Brazil and the United States, according to the agency's July report.
The IEA also said that there could be a drawdown in OECD industry oil inventory levels of 1.6 million barrels per day (mbd) in the third quarter and possibly an even larger drawdown in the fourth quarter, given anticipated demand growth and continued OPEC compliance with its production cutback agreement.
OIL DEMAND
Second quarter demand was revised up 200,000 barrels per day (bd) to 72.8 million barrels per day (mbd), while third quarter demand was revised up by 100,000 bd to 74.6 mbd.
For the full year, the IEA now sees world demand at 75.1 mbd, 50,000 bd more than estimated last month and 1.5% more than in 1998.
The upward revision to the 1999 demand forecast was almost entirely due to Brazil, where demand is much stronger than previously thought, the IEA said. First quarter demand grew almost 2% despite an uncertain economy, the agency noted.
Oil imports to the Pacific region rose in the first quarter on a year-over-year basis for the first time since the fourth quarter 1997, suggesting the start of an economic recovery in Japan and Korea.
Second quarter demand in the United States was also revised up, as preliminary estimates "have again proved to be insignificantly understated."
STOCKDRAW
The stock overhang generated last year has "begun to dissipate," the IEA said. First quarter OECD inventories fell 900,000 bd. In the second quarter, non-OECD inventories fell 650,000 bd, while the OECD stock buildup of 540,000 bd was lower than normal because of OPEC production cuts.
This drawdown is expected to intensify in the third quarter. Of the forecast 1.8 mbd in demand growth, only 200,000 bd is expected to be met by increased supply. This would imply a 1.6 mbd stock drawdown in the third quarter. A drawdown of this magnitude would be "unusual," since stocks have increased in the third quarter in 12 of the last 14 years.
Moreover, a continuation of current trends would imply a stock drawdown of over 3.2 mbd in the fourth quarter, one of the biggest in history. However, "this is not a very plausible scenario," the IEA said, arguing "past history suggests" that OPEC states would likely increase production in the face of rising demand. "A more plausible scenario is that, before the end of the year, there will be an 'upward adjustment' of production" that could result in an "appreciable increase" in oil supplies.
OIL SUPPLY
Preliminary estimates show June world oil output fell 670,000 bd from May, to average 72.3 mbd. Non-OPEC output fell 500,000, due largely to lower North Sea output on scheduled maintainance. The non-OPEC production outlook has been revised up by 100,000 bd in the third quarter and 200,000 in the fourth quarter. For all of 1999, non-OPEC production is now seen at 44.6 mbd, up 100,000 bd from last month's estimate.
OPEC output fell 200,000 bd to 25.8 mbd in June, as compliance with the production cutback agreement reached 91%, up from 88% in May.
Moreover, the sharp drop in oil demand in the state of the former Soviet Union "may have been stemmed, with exports moderating in June," the IEA added. June exports fell 260,000 bd to 3.65 mbd, "still a high level."
The call on OPEC crude and stock levels was revised down by 100,000 bd for the fourth quarter this year. But for the full year 1999, the call on OPEC has been revised up 50,000 to 27.8 mbd due to the slightly stronger world demand estimate. |
