IEA Sees Oil Market Moving Back Into Balance
US oil prices hit at a five-week high and Brent crude rose to their highest since April, after a report from the International Energy Agency that showed global crude production fell for the first time in four months in August with some of that due to the impact of Hurricane Harvey.
As well, weekly data from the US government’s Energy Information Administration (EIA) revealed a smaller-than-expected rise in crude supplies, a hefty drop in gasoline (petrol) stockpiles and a jump in domestic output as production in the Gulf of Mexico and along the Texas coast around Houston recovered in the wake of Hurricane Harvey.
October West Texas Intermediate crude for October delivery jumped $US1.07, or 2.2%, to settle at $US49.30 a barrel in New York - the highest finish since August 9.
In London November Brent rose 89 cents, or 1.6%, to end at $US55.16 a barrel, which was the highest finish since mid-April. The Brent premium to WTI hit the highest level for two years ($US5.86 a barrel) thanks to the supply disruptions along the US Gulf Coast.
Earlier Wednesday, the EIA reported that US crude stocks rose by 5.9 million barrels for the week ended September 8 while domestic US crude output jumped by 572,000 barrels a day to 9.353 million barrels as more wells came back on line after the storm.
Gasoline stockpiles fell 8.4 million barrels for the week, the EIA said - the largest fall on record and due to the impact of Harvey on Gulf Coast refineries.
Meanwhile, the International Energy Agency said in its latest monthly report that the global market is starting to tighten due to robust demand and a drop in output from both the OPEC and other producers.
“Outright benchmark crude prices gained in August, reflecting higher demand in the northern hemisphere and tight physical markets for oil products,” the IEA said.
The agency said global oil supply dropped 720,000 barrels a day last month from July, to 97.7 million barrels a day, largely due to those disruptions to US production due to Hurricane Harvey and supply disruptions in Libya.
The IEA report confirmed the same trend highlighted in OPEC’s August report out the day before. OPEC’s current production is still slightly higher than the amount of crude the group estimates will be needed from the cartel this year, at around 32.7 million barrels a day (b/d).
In August, OPEC’s total crude oil production eased by 79,000 b/d, to average almost 32.8 million b/d. OPEC’s own production is being watched closely as countries exempt from the cut – Libya and Nigeria – have boosted output more than expected this year. Nigeria said overnight it would continue to boost production and would not join the OPEC cuts.
Oil supply from outside of OPEC is expected to grow by 780,000 b/d in 2017, unchanged from last month’s report, to 57.8 million b/d. Production from these countries will grow by a downwardly revised 1 million b/d next year, to 58.8 million b/d.
In its monthly oil market report the OPEC’s research arm said better-than-expected numbers from industrialised nations in the West and China has led it to raise its oil demand growth estimate for 2017 to 1.42 million barrels a day (b/). This is an upward revision of around 50,000 b/d, with total consumption forecast at 96.8 million b/d.
OPEC says world demand growth in 2018 will rise by 1.35 million b/d, an increase of 70,000 b/d from the previous report, to 98.12 million b/d.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.