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

The International Energy Agency (IEA) released its monthly oil market report. The watchdog warns of a slowdown in demand amid tight supplies. Here are the key highlights,

Global supplies:

  • Global oil supplies declined for the sixth consecutive month in April. It declined by 0.3 million barrels per day thanks to production decline in Canada, Kazakhstan, Azerbaijan, and Iran.
  • However, thanks to higher production in the U.S. and other non-OPEC countries, the supplies are higher by 0.775 million barrels per day, from a year ago.
  • The supplies have declined sharply since November and by 3.4 million barrels per day.
  • IEA expects non-OPEC supply growth to slow down to 1.9 million barrels per day in 2019 after a record gain of 2.8 million barrels per day in 2018. The figures are higher than December when IEA forecasted 1.6 million barrels growth and higher than last month’s 1.7 million barrels estimate.  The revision is largely due to production in the United States.

OPEC supplies:

  • According to IEA’s calculations, OPEC production was 30.21 million barrels per day (4-yr low) in April, down 2.6 million barrels from December as Saudi Arabia, UAE, and Kuwait reduced production, while Venezuela and Libya saw production dwindle due to geopolitical uncertainties.
  • Oil flows are higher from Libya, Nigeria, and Iraq.
  • According to IEA, OPEC spare capacity is currently at 3.2 million barrels per day.

Global demand:

  • IEA downgraded its global oil demand growth forecast at 1.3 million barrels per day for 2019, largely due to lower demand from non-OECD Asia. IEA expects new petrochemical projects in China to provide support demand growth, while weaker demand from the U.S. would keep things checked. Refinery demand rising fast in China, accounting for 90 percent of the global growth.
  • 2019 demand would be driven by non-OECD countries like India and China, which are estimated to account for 1.1 million barrels growth.
  • OECD demand would be driven by the United States while Europe lags.
  • Global oil demand is expected to average 100.4 million barrels per day.

Global inventories:

  • On the inventory side, IEA report shows that OECD commercial stocks declined by 25.8 million barrels in March, the 4th decline in 9 months.
  • OECD commercial stocks are currently at 2,849 million barrels.
  • According to IEA, OECD holdings are higher than the 5-year average. In days of forward demand, stocks amount to 59.8 days, their lowest level since July 2018.

WTI is currently trading at $63.2 per barrel and Brent at $9.2 per barrel premium to WTI.

  • Market Data
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