IEA expects gradual oil market re-balancing -Oil Market Report
Petroleumworld 01 18 2019
Markets could return to balance in the first half of this year, if producers party to the Opec, non-Opec production cut deal deliver on their commitments, the IEA said today.
"There are signs that market re-balancing will be gradual," the IEA said in its latest Oil Market Report (OMR). The new production cut deal between Opec and non-Opec partners provided support to oil prices, but "the journey to a balanced market will take time, and is more likely to be a marathon than a sprint", it said.
The IEA said liquids output levels in the US "will once again be a major factor in 2019". It expects US liquids production to grow by 1.3mn b/d in 2019 after recording an "incredible and unexpected growth" of 2.1mn b/d in 2018.
"While the other two giants voluntarily cut output, the US, already the biggest liquids supplier, will reinforce its leadership as the world's number one crude producer," the IEA said. "By the middle of the year, US crude output will probably be more than the capacity of either Saudi Arabia or Russia."
The IEA said that "while Saudi Arabia is determined to protect its price aspirations by delivering substantial production cuts, there is less clarity with regard to its Russian partner", where crude output increased in December "to a new near record of 11.5mn b/d".
The watchdog also highlighted the importance of Iran's production and exports. "In December, total exports increased slightly to over 1.3mn b/d. With US waivers allowing Iran's major customers to buy higher volumes than was previously thought, more oil will remain in the market in the early part of 2019," it said.
The IEA puts global oil supply at 100.6mn b/d in December, around 950,000 b/d lower than a month earlier, on lower Opec output ahead of new supply cuts. Supply was 2.8mn b/d higher than a year earlier, the IEA said.
"Opec production is set to fall further in January, when new Vienna agreement cuts take effect," the watchdog said. Opec today said compliance with its previous deal fell to 98pc in November.
The IEA sees non-Opec production growth slowing to 1.6mn b/d in 2019, from a record 2.6mn b/d last year.
The watchdog puts its call on Opec crude at 31.6mn b/d this year, compared with 31.8mn b/d in 2018. Both figures are unchanged from last month's report.
The IEA kept its oil demand growth projections unchanged, at 1.3mn b/d last year and 1.4mn b/d in 2019.
"The impact of higher oil prices in 2018 is fading, which will help offset lower economic growth," the report said.
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