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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (22583)	8/10/1999 11:12:00 AM
From: Les H	Read Replies (1) \| Respond to of 99985

IEA SEES WORLD OIL DEMAND RECOVERY NEXT YEAR, SUPPLY LAGGING PARIS (MktNews) - Although world oil demand and supply projections point to a tighter market next year, market sentiment may well be ahead of actual developments, the International Energy Agency (IEA) said Tuesday in its monthly Oil Market Report for August. The oil market is "in transition from last year's massive glut to what looks to be a much tighter market next year," the IEA said. But it warned that "a tighter market may be farther down the road than had been perceived." The agency's first estimates of oil demand next year show a rise of 1.83 million barrels per day (+2.4%) to 77.08 mb/d, with growth in both the OECD region (+1.0 mb/d) and outside (+0.9 mb/d). According to the IEA, this is "a very different picture from the last two years, with the demand focus returning to non-OECD countries." Turning to supply, the agency predicted that "the nascent economic recovery in Asia should continue to gather momentum and non-OPEC supply growth will be sluggish." Non-OPEC oil supply is seen rising by only 660,000 b/d next year, with gains from the North Sea, Mexico, Australia, Brazil, Angola and Sudan, and declines for the former Soviet Union, the U.S. and China. As a result, the call on OPEC crude plus stock change for next year is expected to rise by about 1.1 mb/d to 28.9 mb/d. "The fundamentals are set for a tighter oil market: supply is lower and demand recovery is under way," the IEA said. "But the market may not be as far down the road to tightness as sentiment suggests." OECD inventories were revised up by a "massive" 54 million barrels in May, the IEA explained. Even with a significant decline in June, this would leave stocks at the end of the second quarter near levels at the end of last year. "Consequently, the impressive rally in oil prices since mid-February has been based almost entirely on the expectation of a very large stockdraw in the second half of the year, and with that draw occurring from a level much higher than previously thought," it said. For the current year, the agency revised up its projection of total demand for the third quarter by 100,000 b/d and for the fourth quarter by 200,000 b/d, with downward revisions for North America and Europe outweighed by hikes for Latin America, the Middle East and the OECD Pacific region. Supply projections for OECD producers were revised down by 100,000 b/d for both the third and fourth quarters, but offset by increases for non-OECD producers. This left a 100,000 b/d upward revision in non-OPEC supply for the fourth quarter. As a result, projected call on OPEC crude and stock changes were revised up by 100,000 b/d for both the third and fourth quarters to 27.5 mb/d and 29.1 mb/d, respectively. OPEC crude supply rose by 190,000 b/d to 26.1 mb/d in July, due to a surge in Iraqi output that was only partly offset by declines for other members. Excluding Iraq, total output cuts of 3.94 mb/d were made in July, against a cumulative target of 4.32 mb/d. This represented 91% compliance, compared to a revised figure of 87% for June, the agency said. "What remains to be seen is the response of OPEC producers and a few others to the tighter market conditions during the last quarter of 1999 and the first quarter of 2000, generated in part by the targets set by the Hague Agreement and its two precursors," the IEA said. "Without any extra oil from OPEC, the size of the stockdraw to meet the growing demand will be 3.5 mb/d in the first quarter of 2000," it said. "Any Y2K hoarding effects in the fourth quarter could severely compound the problem."