PARIS: World oil markets are unexpectedly tight as growth in advanced economies picks up, the International Energy Agency (IEA) warned yesterday, urging Opec to skip a seasonal output drop as stocks touch six-year lows.
Analyst have warned of an oil glut and drop in prices for months. But the IEA said a pick up in demand in advanced countries, led by the United States, has more than compensated for a slowing of emerging market demand.
The IEA, energy market analysis arm of the OECD group of advanced democracies, put much of that switch down to the rebound in the United States and the tightening of US monetary conditions which has sparked turmoil in emerging markets.
While much has been made of an apparent slowdown in Chinese growth, the IEA said this was only part of the story. “The real surprise has been the recent resurgence of OECD demand growth,” said the IEA in its regular monthly report.
Although it expects the 34 OECD nations to resume its gradual decline, the IEA expects overall demand growth to accelerate this year in line with the broader economy.
It pushed up its forecast for 2014 global demand to 92.6 million barrels per day (mbd), an increase of 125,000 barrels per day.
Meanwhile, the IEA said global oil supply has been disappointing, chiefly due to problems in Opec, with hopes dashed for a sustained increase in Iraqi production.
The result has been surprisingly tight markets. “Far from drowning in oil, markets have had to dig deeply into inventories to meet unexpectedly strong demand,” said the IEA.
It noted OECD commercial stocks posted their steepest quarterly decline since 1999 at the end of last year, leaving stocks at the lowest since 2008.
The IEA noted that at this time of lower seasonal demand market participants often worry about excess supply and feel the need for Opec production cuts.
“Such concerns today would be particularly misplaced, as the market needs to replenish exceptionally low stocks,” said the IEA.
It warned that Opec, which supplies 35 percent of global crude, should produce well above the benchmark measure of the market’s need for its output if badly depleted inventories are to be rebuilt.
The IEA left this “call” on Opec supply at 29 mbd in the first quarter of this year, but raised it slightly to 30 mbd in the second quarter.
It said global supplies slid by 290,000 barrels per day in January to 92.1 mbd, mostly due to non-Opec producers, but this was still a 1.5 mbd gain from the previous year.Reuters
