IEA: Oil markets managed, but beware of the weather

Gladys Abbott
September 13, 2017

Countries outside of OPEC fulfilled the plan on reducing oil production in August by 118% primarily due to results of Kazakhstan and Azerbaijan, according to the IEA September report. The IEA said that the impact of Hurricane Harvey could drive refined product stockpiles below the five-year average by next month's report. The storm is estimated to have shut in roughly 200,000 barrels per day of production in August, with a further 300,000 barrels per day expected to be lost in September.

OPEC cut its output in January 2017 by 1.8 million bpd to help inventories return to a 5-year average and prop up prices.

But with oil demand perking up as well as hurricanes and regular summer maintenance knocking out some production, the IEA said it has seen some of that glut disappear.

The agreement on reducing oil production, which OPEC has concluded with 11 independent producing countries, including Russian Federation, is in effect until the end of March 2018.

The IEA said OPEC crude production fell in August for the first time in five months, thanks to both cuts in production as well as a flare-up in turmoil in Libya disrupting output.

The 12 members of OPEC bound by a supply-cutting pact raised their compliance to 82 percent in August from 75 percent in July. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.3 million barrels, API said.

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The IEA also said the impact from Hurricane Harvey on US oil markets in the Gulf Coast was easing and its impact on global markets was likely to be relatively short-lived, although it would possibly help inventories rebalance more quickly.

"As far as Harvey is concerned, disruption to local oil markets in the US Gulf Coast is easing on a daily basis and its impact on global markets is likely to be relatively short-lived", said the agency, which advises the OECD on energy markets.

Even though the sector was able to cope, the International Energy Agency said severe weather in the United States should serve as a warning for oil markets.

Demand grew by 2.3 million barrels per day (mb/d), or 2.4 per cent, in the second quarter of 2017, prompting the Paris-based organisation to increase its growth estimate for the year to 1.6 mb/d, or 1.7 per cent.

USA crude futures rose 0.9% to $48.68 per barrel.

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