Global Oil Demand To Rise In The Year - IEA

Gladys Abbott
March 22, 2018

A joint OPEC and non-OPEC technical committee estimates that compliance by OPEC and other producing countries with pledged oil output cuts in February hit a new high, two sources familiar with the matter said on Wednesday.

The International Energy Agency said last week that Venezuela, where an economic crisis has cut oil production by nearly half since early 2005 to well below 2 million bpd, was "clearly vulnerable to an accelerated decline", and that such a disruption could tip global markets into deficit despite soaring US output. Analysts were anticipating a build of 2.556 million barrels in crude oil inventories.

The West Texas Intermediate for May delivery jumped 1.63 US dollars to settle at 65.17 dollars a barrel on the New York Mercantile Exchange, while Brent crude for May delivery added 2.03 dollars to close at 69.47 dollars a barrel on the London ICE Futures Exchange. Brent has risen by almost 12 per cent since hitting a two-month low of $61.77 in early February.

May West Texas Intermediate crude oil futures soared on Wednesday to a six-week high on a surprise decline in US crude inventories and as concern persisted over possible disruption to Middle East supply.

"A few things happened", said Jim Ritterbusch, president of Ritterbusch and Associates, referring to the EIA data.

"While there is no peak oil demand in sight, the pace of growth will slow down to 1 million barrels per day by 2023 after expanding by 1.4 million barrels per day in 2018", the IEA's report read.

Only Russia produces more, at around 11 million bpd, although USA output is expected to overtake Russia's later this year as well.

USA drillers added four oil rigs in the week to March 16, bringing the total count to 800, the weekly Baker Hughes drilling report said on Friday.

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"Even though you do see signs that the market is lax on the physical side, do you go aggressively bearish when you have the potential for something happening between the USA and Iran?". The commodity is rising as tensions between Saudi Arabia and Iran (two of the world's leading crude oil producers) weigh on prices.

Should the United States reimpose sanctions against Iran, energy consultancy FGE said that would likely result in a 250,000 to 500,000 barrels per day (bpd) drop in its exports by year-end.

While developed-country oil stocks are dropping closer to the five-year average, OPEC is talking of adjusting the metric to give a more complete picture of the supply cut.

And market supply is increasingly being affected by USA output, which continues to surge.

Official US production and inventory data will be released by the Energy Information Administration (EIA) later on Wednesday.

"So far, the market is sort of ignoring the increase in production", said Ritterbusch.

Worry about Venezuela's tumbling crude production also supported oil markets.

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