Global oil demand will likely grow faster than expected this year, partly offsetting a surge in U.S. shale production and keeping the market in balance, the International Energy Agency said Thursday.
In its closely watched monthly oil-market report, the IEA predicted the world’s appetite for crude would increase by 1.5 million barrels a day to reach 99.3 million barrels a day in 2018, an upward revision of 90,000 barrels. The uptick is expected to be driven by robust demand in industrialized nations, including Europe, the U.S. and Japan, the agency said.
“The market rebalancing is clearly moving ahead with…supply and demand becoming more closely aligned,” the report noted.
The IEA, a Paris-based organization that advises governments and corporations on energy trends, struck a more optimistic tone than last month, when it warned that U.S. shale production could overwhelm global demand and undermine the oil market’s fragile recovery.
The agency said Thursday that global oil supply came down slightly in February in monthly terms to 97.9 million barrels a day, but was still up 740,000 barrels compared with a year earlier.
The IEA expects supply growth this year to be driven by countries outside the Organization of the Petroleum Exporting Countries. Non-OPEC supply is expected to increase by nearly 1.8 million barrels a day in 2018, with 1.5 million barrels coming from U.S. crude production, the report said.
U.S. crude output rose by 135,000 barrels a day last month, to a record 10.2 million barrels a day, boosted by burgeoning shale output, the IEA said. Earlier this month, the agency said it expects the U.S. to overtake Russia to become the world’s largest oil producer by 2023.
OPEC production, however, fell last month, to 32.1 million barrels a day. OPEC and 10 producers outside the oil cartel, including Russia, have been holding back output by 1.8 million barrels a day since the start of last year in an effort to rein in a global supply glut that has weighed on prices since late 2014.
Crude prices rose more than 50% in the second half of 2017 on strong compliance with OPEC’s deal, geopolitical risk to supply and a weaker U.S. dollar. Brent, the global benchmark, reached three-year highs of more than $70 a barrel at the start of this year but gave up some of those gains amid a global equity rout in early February.
Brent closed up 0.4%, at $64.89 a barrel, on Wednesday.
The IEA estimates Brent averaging around $67 a barrel in 2018, with prices currently up roughly 20% more than this time last year.
Commercial petroleum stocks in the Organization for Economic Cooperation and Development—a group of industrialized, oil-consuming nations that includes the U.S.—rose in January by 18 million barrels, to 2.871 billion barrels, according to the IEA. The build, which was the first in seven months, was mainly a result of seasonal factors, the agency said, adding that OECD inventories stood at just 53 million barrels above OPEC’s target of the last five-year average.
Source: WSJ.com
