The International Energy Agency (IEA) released its monthly Oil Market Report this morning. The single, most important data point in the report is that global oil inventories grew by 1.2 million barrels in the first three months of 2012. The main effect of this inventory growth is that prices have begun to moderate somewhat.
The IEA continues to forecast daily global demand of 89.9 million barrels, up 0.9 million barrels from 2011’s daily demand. OPEC supply in March totaled 31.43 million barrels/day and non-OPEC supply totaled 52.7 million barrels/day. OPEC production grew by 135,000 barrels/day in March, while non-OPEC production fell by 500,000 barrels/day. The non-OPEC decline was attributed to lower production from Canada’s oil sands and from the UK’s offshore fields.
The industry inventory deficit shrunk from 40.4 million barrels in January to 13.9 million barrels in February and preliminary data for March indicates that industry inventory will grow by 22.6 million barrels.
Global refinery runs for 2012 have been forecast downward, at 74.8 million barrels/day. Current refinery throughput is 74.4 million barrels/day but as seasonal maintenance is completed and capacity ramps up, refined product supply will be 500,000 barrels/day higher than in 2011.
As the balance between demand and supply returns, crude prices will continue to decline although the drop will be slow. Provided, of course, that there is no significant interruption to supply such as might occur in the event of a conflict in the Persian Gulf. The balance remains precarious and almost any geopolitical incident could throw it out of whack, but the trend toward lower crude prices is clear.