Oil Market - May 22

[dan_s]

The oil market has essentially reached a balance and demand for oil will continue to accelerate in the near term, the IEA said in its monthly report published 5/16/2017, just nine days before OPEC's much anticipated ministerial meeting. "We think the re-balancing is here and the re-balancing will continue," Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC on Tuesday. "In the first quarter of 2017, we might not have seen a resounding return to deficits but this report confirms our recent message that re-balancing is essentially here and, in the short term at least, is accelerating," the IEA report added.

According to the IEA's monthly report, global demand growth is poised to fall for a second consecutive year. The IEA forecast global demand growth of 1.3 million b/d in 2017, unchanged from its April report. However, the report warned even if supply cuts are extended at OPEC's 5/25 meeting, "much work remains to be done in the second half of 2017" in order to drain stocks closer to its benchmark five-year average. "If, as a scenario and not a forecast, the current (OPEC) output cuts were to be extended for the rest of 2017, oil stocks would start to fall quite sharply… but because they are falling from such a great height, they won't get down to the five-year average until much later in the year and possibly not then," Atkinson said. The report found while output from OPEC members had inched higher, average compliance remained robust at approximately 96 percent.

In terms of demand, the IEA said Chinese consumption remained relatively strong, with an approximate 425,000 b/d gain in 1Q 2017, compared with 1Q 2016. The Indian government's demonetization policy will likely lower that country's consumption this year. The IEA expects Indian demand growth to hover around 200,000 b/d each quarter. In the U.S. consumption has weakened and the IEA forecast flat U.S. demand this year. The latest official U.S. demand numbers for February showed the biggest decline in more than four years at 495,000 b/d, the agency said. [Mild weather in Q1 lowered demand for heating oil. As soon as the kids get out of school, demand for gasoline will ramp up. - Dan]

Global oil supply fell by 140,000 b/d in April to 96.17 million b/d, led by declines in nations outside OPEC, primarily from Canada. But with strong production increases in the U.S., Brazil and Kazakhstan, the IEA said non-OPEC output would grow by 600,000 b/d this year. Higher output from Nigeria and Saudi Arabia offset lower flows from Libya and Iran in April, while compliance with OPEC's agreed 1.2-million-b/d cut remained robust at around 96%, the IEA said. OPEC crude production was down 535,000 b/d compared to April 2016, the largest year-on-year decline in nearly three years.

Global demand for hydrocarbon based liquids is expected to top 99 million barrels per day in the 4th quarter.

PS: IMO there is too much concern over inventory levels. We live in a world that runs on products refined primarily from crude oil. Demand goes up by more than a million barrels per day each year AND much of the Western world's supply of oil comes from countries with unstable governments and non-stop wars. Doesn't it make sense for the U.S. and Europe to keep higher crude oil inventories?

[dan_s]

Oil price forecast by Hart Energy at link below.

http://www.epmag.com/videos/whats-affec ... UifQ%3D%3D