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IEA sees Iran flows up by 300,000 b/d by end-March

19 Jan 2016 09:00 GMT
IEA sees Iran flows up by 300,000 b/d by end-March

London, 19 January (Argus) — The lifting of US and EU nuclear-related sanctions against Iran could add about 300,000 b/d of supply to the global oil market by the end of the current quarter, and oil prices could fall further if Iran moves quickly to offer its oil on attractive terms, according to the IEA.

"Our assessment is that considerable progress has been made in readying its oil network and identifying prospective buyers" by Iran, the IEA said in its monthly Oil Market Report (OMR). "We expect flows from Iranian oil fields, now free of any restrictions, to rise towards a pre-sanctions capacity of 3.6mn b/d within six months".

Consequently, the oil market faces the prospect of a third successive year when supply will exceed demand by 1.0mn b/d "and there will be enormous strain on the ability of the oil system to absorb it efficiently," the IEA said.

"Although we do not formally forecast Opec oil production, in a scenario whereby Iran adds 600,000 b/d to the market by mid-year and other members maintain current output, global oil supply could exceed demand by 1.5mn b/d in the first half of 2016," it said. "While the pace of stock building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over-supply".

At the same time, the IEA revised down its 2016 call on Opec crude — including returning member Indonesia — by 300,000 b/d to 31.7mn b/d because of anticipated weaker demand growth and more resilient non-Opec supply than forecast previously. The 2016 call is 1.6mn b/d higher than in 2015. The IEA expects the call to reach 32.32mn b/d in the second half of the year, "roughly what the group is currently producing".

The IEA now expects demand growth to slow down to 1.2mn b/d in 2016 from 1.7mn b/d last year, taking the 2016 global demand to 95.7mn b/d.

Global oil supplies increased by 2.6mn b/d last year, although by December growth had eased to 600,000 b/d. Nevertheless, "non-Opec oil production is proving resilient in the face of plunging oil prices, with the fourth-quarter output revised up by 280,000 b/d since last month's report", the IEA said. But it expects non-Opec supply to fall by 600,000 b/d this year to 57mn b/d, after growing by 1.4mn b/d in 2015 and 2.4mn b/d in 2014.

Global inventories are likely to increase by a further 285mn bl this year after growing by a notional 1bn bl in 2014-15, according to the IEA. "Despite significant capacity expansions over 2016, this stock build will put storage infrastructure under pressure and could see floating storage become profitable," it said.

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