IEA sees 2018 oil price capped, market broadly balanced
London, 12 October (Argus) — Global oil demand and non-Opec supply are likely to grow by about the same volume next year, diminishing the prospect of higher oil prices should Opec production remain at 32.7mn b/d, the IEA said today.
"Leading oil producers will have looked at their market balances and probably drawn the same conclusion. The next few weeks ahead of the producers' meeting in Vienna on 30 November will be crucial in shaping their decision on output," the Paris-based watchdog said in its latest Oil Market Report (OMR).
"A lot has been achieved towards stabilising the market, but to build on this success in 2018 will require continued discipline," it said. The Opec and non-Opec output cut agreement expires in March.
The IEA kept its projections for demand growth and non-Opec supply little changed from its September report. It expects consumption to increase by 1.6mn b/d this year and by 1.4mn b/d next, bringing demand to 99.1mn b/d in 2018. Non-Opec supply is seen rising by 700,000 b/d in 2017 and by 1.5mn b/d in 2018, to 59.6mn b/d.
"The US will be the largest contributor to growth in both 2017 and 2018, adding 470,000 b/d and 1.1mn b/d, respectively," it said.
The agency's call on Opec crude stands at 32.7mn b/d in 2017 and 32.5mn b/d next year, also little changed from the previous report.
The IEA estimates global crude and oil products inventories are on track to fall by 300,000 b/d this year.
"For next year, the crude and product markets look broadly balanced, assuming Opec holds output steady at around current levels," it said.
Commercial inventories in developed economies fell to 3.015bn bl in August, or 170mn bl above the five-year average, compared with a 318mn bl surplus at the end of January, thanks to higher-than-expected demand.
"Preliminary data for September show oil stocks drawing everywhere, from Europe to Fujairah, Japan, Singapore, the US and floating storage," the IEA said. "Global oil stocks are likely to have drawn in the third quarter of 2017 for only the second time since 2014, as reductions in floating storage and the OECD outweighed net builds in China".
The agency estimates "known oil inventories" shrank by 600,000 in July-September.
Global oil supply increased by 90,000 b/d in September from August, to 97.5mn b/d, on rising non-Opec supply, the IEA said. The September figure was 620,000 b/d above a year ago.
The IEA estimates Opec's output at 32.65mn b/d in September, down by 400,000 b/d on a year earlier "when Opec started its run of record output". Among non-Opec countries, Russia and Mexico saw the largest year-on-year falls.
"There is little doubt that leading producers have re-committed to do whatever it takes to underpin the market and to support the long process of re-balancing," the IEA said.