IEA: Oil Market Report - June 14

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

IEA: Oil Market Report - June 14

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In this Report, we publish our first outlook for 2020. As we do so, volatility has returned to oil markets with a dramatic sell-off in late May seeing Brent prices fall from $70/bbl to $60/bbl. Until recently, the focus has been on the supply side with the familiar list of uncertainties – Iran, Venezuela, Libya, and the Vienna Agreement – lifting Brent prices above $70/bbl in early April and keeping them there until late May. Not that supply concerns have gone away: yesterday oil prices initially increased by 4% on news of the attacks on two tankers in the Gulf of Oman, before easing back slightly.

Now, the main focus is on oil demand as economic sentiment weakens. In May, the OECD published an outlook for global GDP growth for 2019 of 3.2%, lower than our previous assumption. World trade growth has fallen back to its slowest pace since the financial crisis ten years ago, according to data from the Netherlands Bureau of Economic Policy Analysis and various purchasing managers’ indices.

The consequences for oil demand are becoming apparent. In 1Q19, growth was only 0.3 mb/d versus a very strong 1Q18, the lowest for any quarter since 4Q11. The main weakness was in OECD countries where demand fell by a significant 0.6 mb/d, spread across all regions. There were various factors: a warm winter in Japan, a slowdown in the petrochemicals industry in Europe, and tepid gasoline and diesel demand in the United States, with the worsening trade outlook a common theme across all regions. In contrast, the non-OECD world saw demand rise by 0.9 mb/d, although recent data for China suggest that growth in April was a lacklustre 0.2 mb/d. In 2Q19, we see global demand growth 0.1 mb/d lower than in last month’s Report. For now though, there is optimism that the latter part of this year and next year will see an improved economic picture. The OECD sees global GDP growth rebounding to 3.4% in 2020, assuming that trade disputes are resolved and confidence rebuilds. This suggests that global oil demand growth will have scope to recover from 1.2 mb/d in 2019 to 1.4 mb/d in 2020.

Meeting the expected demand growth is unlikely to be a problem. Plentiful supply will be available from non-OPEC countries. The US will contribute 90% of this year’s 1.9 mb/d increase in supply and in 2020 non-OPEC growth will be significantly higher at 2.3 mb/d with US gains supported by important contributions from Brazil, Canada, and Norway. Later this month, Vienna Agreement oil ministers, faced with short-term uncertainty over the strength of demand and relentless supply growth from their competitors, are due to discuss the fate of their output deal.

Ministers will note that OECD oil stocks remain at comfortable levels 16 mb above the five-year average. However, they will also note that although in 1Q19 weak demand helped create a surplus of 1.1 mb/d, in 2Q19 the market is in deficit by an estimated 0.4 mb/d, with the backwardated price structure reflecting tighter markets. This deficit is partly due to the fact that in May the Vienna Agreement countries cut output by 0.5 mb/d in excess of their committed 1.2 mb/d. In 3Q19, the market could receive further support from an expected pick-up in refining activity.

Recently, high levels of maintenance in the US and Europe, low runs in Japan and Korea, and fallout from the Druzhba pipeline contamination contributed to weak growth in global refining throughput. This could be about to change: according to our estimates, crude runs in August could be about 4 mb/d higher than in May. This might cause greater tightness in crude markets, particularly for sour barrels if the Vienna Agreement is extended and there is no change in the situations in Iran and Venezuela. Of course, much depends on the strength of oil demand later in the year.

A clear message from our first look at 2020 is that there is plenty of non-OPEC supply growth available to meet any likely level of demand, assuming no major geopolitical shock, and the OPEC countries are sitting on 3.2 mb/d of spare capacity. This is welcome news for consumers and the wider health of the currently vulnerable global economy, as it will limit significant upward pressure on oil prices. However, this must be viewed against the needs of producers particularly with regard to investment in the new capacity that will be needed in the medium term.

Read more: https://www.iea.org/newsroom/news/2019/ ... -june.html
Dan Steffens
Energy Prospectus Group
dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Re: IEA: Oil Market Report - June 14

Post by dan_s »

TPH Morning Notes on IEA report:

OECD inventories climbed 15.8mmbbls in April, ~in line with the 5-yr average of 15.2mmbbls, but total stocks at 2,883mmbbls tracking ~16mmbbls above the 5-yr average. April uptick was largely driven by rise in crude (+12.8mmbbls vs. 0.3mmbbls 5-yr norm) and other products (+17.9mmbbls), somewhat offset by decline in gasoline (-12.9mmbbls) and distillates (-10.2mmbbls). Stocks were up following two months of declines, however March was revised up quite notably (+17.9mmbbls, driven by OECD Americas), whereas February was revised down 1mmbbls. Preliminary data for May suggests another monthly build as we're seeing inventory climb in the US and Japan, slightly offset by draws in Europe. OPEC production fell 230mbpd m/m in May to lowest level since 2014, largely driven by Iran sanctions, Saudi Arabia, and Nigeria (Trans Forcados pipeline outage). Compliance to announced cuts remains at 133% for OPEC with Saudi Arabia at 290% (in contrast to Iraq producing 270mbpd above its quota), whereas compliance for non-OPEC group climbed to 169% (from 151%) led by steep cuts in Russia due to the Druzhbha line contamination (132% compliant). On the demand side, the IEA lowered its 2019 growth estimate by 100mbpd for the second straight month to +1.2mmbpd (also lowering Q2'19 growth by 300mbpd), largely driven by weak Q1 consumption data from the Americas. Global oil demand climbed just 250mbpd in Q1'19, the lowest annual increase since Q4'11. Finally, the EIA also provided their 2020 demand forecast for the first time at +1.4mmbpd -- driven by non-OECD countries (+880mbpd).
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: IEA: Oil Market Report - June 14

Post by dan_s »

IEA report examines natural gas demand . Daily Energy Insider

A recently released International Energy Agency (IEA) report maintains natural gas demand grew 4.6 percent last year, representing its fastest yearly pace since 2010. “Natural gas helped to reduce air pollution and limit the rise in energy-related CO2 emissions by displacing coal and oil in power generation, heating, and industrial uses,” IEA Executive Director Fatih Birol said. “Natural gas can contribute to a cleaner global energy system. But it faces its own challenges, including remaining price competitive in emerging markets and reducing methane emissions along the natural gas supply chain.” The analysis determined global demand for natural gas is slated to continue growing over the next five years, buoyed by strong consumption in fast-growing Asian economies and supported by the continued development of the international gas trade.
Dan Steffens
Energy Prospectus Group
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