Oil supply boost may defer market tightening - IEA
The International Energy Agency said that world oil markets may take longer to tighten than expected due to a surge in OPEC supply and a potential rise in Iranian exports, even as demand shows signs of strength.
The agency raised its forecast for global oil demand growth in 2015 for a second consecutive month, citing strong pockets of consumption in Europe, India and the United States.
Oil prices have halved from above USD 115 a barrel last June due to ample supply, in a decline that deepened after the Organization of the Petroleum Exporting Countries chose to defend market share rather than cut output.
Global oil demand is rising faster than projected, but so is supply and the IEA, which advises industrialised countries on energy policy, rolled back its prediction of when the market would tighten.
The IEA said in its monthly report that "Recent developments thus may call into question past expectations that supply and demand responses would tighten the market from mid-year on."
OPEC production surged to 31.02 million barrels per day in March, almost a 2 year high, led by Saudi Arabia.
Saudi oil output rose by 390,000 barrel per day in March to 10.1 million barrel per day, its highest since September 2013, confirming industry reports of a surge in production as the kingdom meets domestic demand and bolsters its global market share.
Saudi output is likely to keep rising, analysts say, reducing global spare production capacity. London-based consultancy Energy Aspects said that this week Saudi crude production could reach a record 11 million barrel per day this summer.
Iranian oil production could rise sharply if economic sanctions are removed from the Islamic Republic.
The IEA said that "Advances in talks on Tehran's nuclear programme not only call into question past working assumptions on future Iranian output but may already have encouraged other producers to hike supply and stake out market share ahead of Iran's potential return."
In previous reports, the IEA predicted the oil market would rebalance in the second half of 2015, as North American supply growth slows and lower prices help boost demand.
The IEA raised its forecast for growth in world oil use this year by 90,000 barrel per day to 1.08 million barrel per day, bringing demand in 2015 to an average of 93.60 million barrel per day.
It said that consumption may falter in some areas but OPEC production was likely to stay high and could even rise further in April.
The agency left its forecast of demand for OPEC crude in 2015 unchanged at 29.50 million barrel per day, pointing to a rising supply surplus if OPEC keeps the same output.
The IEA said that Iran's framework agreement with six world powers over its nuclear programme could open the way for Tehran to increase its share of the world oil market.
Iran could pump as much as 3.6 million barrel per day within months of sanctions being lifted, up from 2.8 million barrel per day in March, it said. Iran has around 30 million barrels in storage on tankers that could be shipped quickly.
The IEA said that "Substantially higher production is unlikely before next year, but Tehran could, in theory, raise exports out of floating storage before then."
Source : Reuters