Global demand estimates for crude oil dropped by 70,000 barrels in 2018 and by 90,000 barrels a day in 2019, according to the latest Oil Market Report from the International Energy Agency (IEA). Demand growth for last year is now estimated at 1.2 million barrels a day, and the estimate for 2019 has been revised to 1.3 million barrels a day.
The IEA noted, however, that “slower demand growth is likely to be short-lived.” The agency expects demand to gather pace in the second half of this year.
China and India will account for 700,000 barrels of new demand this year, while other emerging market demand will rise by 400,000 barrels a day.
Crude oil supply dropped by 300,000 barrels a day in April, according to the IEA, led by falling production in Canada, Kazakhstan, Azerbaijan and Iran. Supply totaled 99.3 million barrels a day last month, up by 775,000 barrels year over year, and supply growth for 2019 is now tabbed at 1.9 million barrels a day, compared with growth of 2.8 million barrels a day in 2018.
OPEC supply rose by 60,000 barrels a day in April to 30.21 million barrels on rising production in Libya, Nigeria and Iraq. Demand for OPEC barrels is forecast at 30.9 million barrels a day for the second quarter of this year, before dropping to 30.2 million barrels a day in the second half of 2019.
Crude oil stockpiles hit their lowest level since July of last year, dropping by 25.8 million barrels to 2.85 billion barrels.
The price of a barrel of Brent crude reached a five-month high of $74.57 a barrel in late April, following the end of U.S. waivers on exports of Iranian oil. Brent prices are down about 6% since reaching that peak.
The net effect of the price movements in Brent crude last month was essentially a wash. One notable effect of the price increases since the beginning of the year is that Brent for immediate delivery now costs about $3 a barrel more than Brent for delivery in six months. This market condition, known as backwardation, usually indicates higher present demand (reflected in spot market pricing) compared to expected future demand.
Crude futures markets saw a second straight week of net sales of futures contracts, another signal that oil prices are expected to decline in the coming months.
Brent crude for July delivery traded down about 0.6% Wednesday morning, at $70.82 in a 52-week range of $51.24 to $84.11.
West Texas Intermediate (WTI) crude traded down about 1% at $61.15 in a 52-week range of $43.80 to $75.65.
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