IEA forecast for global demand growth remains unchanged at 1.6mn b/d in 2017 and 1.4mn b/d in 2018

Following very strong year-on-year demand growth of 2.2mn b/d in 2Q2017, the pace slowed to 1.2mn b/d in 3Q2017, reflecting relatively weak July and August data and the impact of hurricanes in September, according to the International Energy Agency’s latest Oil market report. As a result, its forecast for global demand growth remains unchanged at 1.6mn b/d in 2017 (or 1.6%) and 1.4mn b/d in 2018 (or 1.4%).

Global oil supply rose 90,000 b/d in September, to 97.5mn b/d as non-OPEC output edged higher. Output stands 620,000 b/d higher than last year. In 2017, non-OPEC supplies are expected to grow by 0.7mn b/d, followed by a 1.5mn b/d increase in 2018.

OPEC crude output was virtually unchanged in September 2017 as slightly higher flows from Libya and Iraq offset lower supply from Venezuela. Output of 32.65mn b/d was down 400,000 b/d on a year ago. Compliance with supply cuts for the year-to-date is 86%.

Earlier, OECD commercial stocks fell 14.2mn barrels in August, from an upwardly revised July. The surplus over the five-year average fell to 170mn barrels. Global stocks are likely to have drawn in 3Q2017 as reductions in floating storage and the OECD outweighed net builds in China.

For 4Q2017, the IEA’s refinery throughput forecast edges up to 80.9mn b/d, up 0.1mn b/d quarter-on-quarter. Its first forecast for January 2018 implies 1.2mn b/d year-on-year growth, although runs decline by 0.4mn b/d from December to just under 82mn b/d.

The report’s global crude and product balances show inventories drawing in 2017 by 0.1mn b/d and 0.2mn b/d, respectively. For next year, the crude and product markets are expected to look broadly balanced, assuming OPEC holds output steady at around current levels.

Commenting on producers commitment to their agreement to cut output and balance the market, the IEA noted that: ‘A few weeks ahead of the next OPEC meeting, Saudi Arabia and Russia have strengthened their relationship with a high level summit, and a series of investment agreements accompanied by statements suggesting that the current oil output cuts might be tightened. Of course, we must wait and see what happens. But there is little doubt that leading producers have re-committed to do whatever it takes to underpin the market and to support the long process of re-balancing.’

‘The backdrop to these high-level manoeuvers is the recent volatility we have seen in the Brent crude market, with prices coming close to the symbolic level of $60/b before retreating to $57/b. Uncertainty with some suppliers (Libya, Venezuela, Iran and northern Iraq) and signs of possibly slower than expected growth in US shale production, coupled with strong oil demand, provided upward momentum to the market.’