Oil in Global Economy Series: Key highlights from IEA’s MOMR

Today, International Energy Agency released its monthly oil market report. The report suggests an easing oil market. Here are the key highlights,

Global supplies:

• Global oil supplies rose by 0.28 million barrels per day in May to 98.7 million barrels per day thanks to increasing non-OPEC output (up 2.2 million barrels y/y) and higher OPEC production. Output was 1.78 million barrels per day higher than a year ago, largely due to higher production in the U.S.
• Due to the strong growth in U.S. production, IEA expects non-OPEC supply to grow by 2 million barrels per in 2018.  

OPEC supplies:

• According to IEA’s calculations, OPEC produced 31.69 million barrels per day in May, up 50,000 barrels from April as higher supplies from Saudi Arabia, Iraq, and Algeria surpassed the decline in Nigeria.
• According to IEA, OPEC members might have to produce more to offset the decline in Venezuela and Iran due to looming sanctions.

Global demand:

• According to IEA, the global oil demand was 97.8 million barrels per day in 2017.
• IEA estimates demand growth for 2018 at 1.4 million barrels per day, no change from its last forecast.  
• IEA expects demand slowdown in H2 2018 despite strong Q1 and Q2 demand due to higher oil price.
• IEA pegged its demand estimate for 2019 at 1.4 million barrels citing strong economic growth and stable prices and highlighted the risks to the forecasts, which are a higher price, trade disruption and government measures to ease price.

Global inventories:

• On the inventory side, IEA report shows that OECD commercial stocks declined by 3.1 million barrels in April.
• OECD commercial stocks are currently at 2,809 million barrels, which is 1 million barrels lower than the five-year average. It is also the lowest level for crude stocks since March 2015.
• Stocks declined 154 million barrels in 2017 and down 220 million barrels from a year ago.
• Middle distillate declined by 7.4 million barrels to significantly below the five-year average.

WTI is currently trading at $66 per barrel and Brent at $9.7 per barrel premium to WTI.