The global oil market is rebalancing and the pace at which supply and demand are falling into line is picking up, even if inventories still fail to reflect the impact of OPEC supply cuts, the International Energy Agency said on Tuesday.
In its monthly report, the IEA kept its global demand growth forecast for 2017 unchanged at 1.3 million barrels per day (bpd), because of slowdowns in previously robust consumer countries such as the United States, Germany and Turkey.
Commercial inventories fell for a second straight month in March, by 32.9 million barrels to 3.025 billion barrels.
But for the first quarter as a whole, stocks in industrialised countries rose by 24.1 million barrels and the IEA said preliminary data suggested inventories increased again in April.
“It has taken some time for stocks to reflect lower supply when volumes produced before output cuts by OPEC and 11 non-OPEC countries took effect are still being absorbed by the market,” the Paris-based IEA said.
In the first quarter of 2017, “we might not have seen a resounding return to deficits but this report confirms our recent message that rebalancing is essentially here and, in the short term at least, is accelerating”.
Global oil supply fell by 140,000 bpd in April to 96.17 million bpd, led by declines in nations outside the Organization of the Petroleum Exporting Countries, such as Canada.
But with strong production increases in the United States, Brazil and Kazakhstan, the IEA said non-OPEC output would grow by 600,000 bpd this year.
OPEC meets on May 25 to discuss an extension of the deal it reached with some of its major rivals, such as Russia, to cut oil output by a joint 1.8 million bpd in the first half of the year and force a drawdown in global inventories.
The IEA, which advises Western governments on energy policy, said if OPEC maintained output at April’s 31.8 million bpd, and nothing changed elsewhere in the balance, there would be an implied global draw of 700,000 bpd in the second quarter.
“Adopting the same scenario approach for the second half of 2017, the stock draws are likely to be even greater,” the IEA said.
Higher output from Nigeria and Saudi Arabia offset lower flows from Libya and Iran in April, while compliance with OPEC’s agreed 1.2-million-bpd cut remained robust at around 96 per cent, the IEA said.
OPEC crude production was down 535,000 bpd compared to April 2016, the largest year-on-year decline in nearly three years.
In terms of demand, the IEA said Chinese consumption remained relatively strong, with a near-425,000-bpd gain in the first quarter of the year, compared with 2016.
The Indian government’s demonetisation policy will likely lower that country’s consumption this year. The IEA expects Indian demand growth to hover around 200,000 bpd.
In the United States, the top source for global crude supply growth, consumption has weakened and the IEA forecast flat U.S. demand this year.
The latest official US demand numbers for February showed the biggest decline in more than four years at 495,000 bpd, the agency said.