The International Energy Agency has changed its tune about the oil market “drowning in supply” this year.
That is what it thought back in January – but in its latest forecast the IEA said unplanned disruptions to oil output could help reduce a global glut of unused crude.
It points to event like the wildfire in the Canadian province of Alberta as well as outages in Nigeria, Libya, Venezuela and Kuwait as well as falling US shale output.
And it foresees increasing demand from India and China as more people there become vehicle owners.
Another factor is an expected decline in output from non-OPEC producers by 800,000 barrels per day (bpd) this year.
On the demand front, the Paris-based IEA left its forecast for global growth broadly unchanged at 1.2 million bpd for this year, but said demand could rise.
India start performer
“India is the star performer: oil demand in the first quarter of 2016 was 400,000 bpd higher year-on-year, representing nearly 30 percent of the global increase. This provides further support for the argument that India is taking over from China as the main growth market for oil,” the IEA said.
The build in global inventories of crude oil is expected to slow to just 200,000 barrels per day in the second half of this year, from 1.3 million bpd in the first half, the IEA said.
Price rise slows
Benchmark Brent crude prices have risen by 30 percent since the start of the year to above $45 a barrel, their highest since late 2015, buoyed by the extent of unexpected production outages around the world.
But prices have risen only about 12 percent, or $5, in the last month, when such interruptions spread more widely, mainly because of the billions of barrels of unused crude and refined products in tanks around the world.
“Further oil price rises … are likely to be limited by brimming crude oil and products stocks that will remain a feature of the market until more normal levels of inventory are reached,” the IEA said.
Iran pumping more quickly than expected
OPEC supply, led by increases in Iran, Iraq and the United Arab Emirates, pushed the group’s output up 330,000 barrels per day in April to a seven-year high of 32.76 million barrels per day, the agency said.
Iran, which returned to global markets in January after the lifting of international sanctions linked to its nuclear activities, increased production and exports more quickly than expected, the IEA added.