Crude Oil Inventories Decline, but Imbalance to Continue: IEA
In its monthly Oil Market Report for November, released Tuesday morning, the International Energy Agency (IEA) said that global crude supplies rose by 100,000 barrels per day in October to 97.5 million barrels per day.
Production fell by 470,000 barrels a day compared with October 2016 as OPEC supply fell sharply — 80,000 barrels per day — and total cartel output of 32.53 million barrels a day was 830,000 barrels a day less than a year ago.
The IEA expects the global oversupply of oil to persist through the first quarter of 2018. Refined products inventories are also expected to rise.
OECD commercial inventories in September fell by 40 million barrels to below 3 billion barrels for the first time in two years. The IEA said that Hurricane Harvey contributed to the decline’s third-quarter total drop of 63 million barrels.
For all of 2017, total demand is now forecast at 97.7 million barrels a day, up by 1.5 million barrels a day (1.6%) compared to 2016. For 2018 the IEA is forecasting growth of 1.3 million barrels a day (1.4%) to a total of 98.9 million barrels a day.
The IEA also released the 2017 edition of its World Energy Outlook Tuesday morning. The agency’s “New Policies Scenario” is based on four major shifts in the global energy system: the rapid deployment and falling costs of clean energy technologies; the growing electrification of energy; the shift to a more services-oriented economy and a cleaner energy mix in China; and the resilience of shale gas and tight oil in the United States.
According to the scenario, the United States accounts for 80% of the increase in the world’s oil supply through 2025, maintaining downward pressure on crude oil pricing. From then through 2040, greater fuel efficiency and more fuel switching lowers oil use for transportation.
Once U.S. production from shale and tight oil plays plateaus and non-OPEC production as a whole declines in the late 2020s, the Middle East once again becomes the primary supplier. The IEA estimates a need to develop a total of 670 billion barrels of new resource through 2040 in order to make up for declines to existing fields.
More details from the World Energy Outlook are available at the IEA website.
Early Tuesday morning, WTI crude for December delivery traded at $56.49 a barrel, down about 0.5% compared with Monday’s closing price of $56.76. Brent crude for January delivery traded down about 0.5% at $62.86 a barrel in London.