Global oil markets have started to rebalance
Global oil demand is outpacing expectations and excess crude inventories are falling, yet prices will only rise “modestly” the International Energy Agency said, presenting a challenge for global producers seeking to bolster crude through output cuts. Financial Times reports in its article Global oil markets have ‘started to rebalance’ — IEA that Opec producers are targeting $60 a barrel, which even delegates say is looking unlikely. Oil consumption will increase in 2017 by an upwardly revised 1.6m barrels a day to 97.7m b/d, the energy body said its closely-watched monthly oil market report published on Wednesday.
Strong demand from the US and Europe in the second quarter and robust consumption from elsewhere will outweigh an expected slowdown from Hurricanes Harvey and Irma in the third quarter. This will support efforts by Opec countries and other producers including Russia, that have combined forces to curb global supplies by around 1.8m b/d to ease inflated oil stockpiles and boost prices. “Oil markets have started to rebalance,” said the IEA, adding prices were “pointing to firmer fundamentals.”
Global oil supply meanwhile fell in August by 720,000 b/d on unplanned outages and scheduled maintenance, mainly from countries outside of the Opec cartel, the IEA said. Non-Opec supplies fell by more than 500,000 b/d to 58m b/d, but it is still more than 1m b/d higher than a year ago with growth dominated by the US, Kazakhstan, Russia, Canada and Brazil. Growth is forecast to average 700,000 b/d in 2017 and nearly 1.5 mb/d in 2018 as higher production from Canada and the North Sea offsets weaker US and Brazilian estimates. Opec crude output fell in August for the first time in five months, after renewed turmoil in Libya disrupted supply and others pumped less, IEA data showed.
Output decreased by 210,000 b/d to almost 32.7m b/d in August. Commercial oil stockpiles were unchanged in July at just over 3bn barrels, but they would normally increase at this time. Excess inventories, compared with the five-year average global producers are targeting, fell to 190m barrels.
The IEA said prices will find further support. “Expectations are that markets are tightening and that prices will rise, albeit very modestly,” it said. Despite stronger fundamentals there has been a question over how much prices will rise. US shale supply has been resilient , production from countries exempt from the production deal has surpassed forecasts and some participating nations have not cut output as much as they should have.
Opec producers are targeting $60 a barrel, which even delegates say is looking unlikely. The latest report took a special look at US gulf coast infrastructure after the recent hurricanes that have caused flooding and disrupted facilities such as refineries in the important world energy hub.
For a long time the gulf coast has been a production and refining centre, but today it is an important global trading hub with more than 4m b/d of refined products and 800,000 b/d of crude oil being exported. “In some respects, it can be compared to the Strait of Hormuz in that normal operations are too important to fail,” the IEA said. The IEA said it is time to reexamine the region’s energy security with the US adding refined products to the country’s strategic petroleum reserves alongside crude.