IEA sees supply tightness supporting oil prices

Global spare capacity might be "stretched to the limit" as producers increase supply, and these concerns are likely to continue to underpin oil prices, the IEA said today.

After Opec yesterday moved to reassure on its ability to support oil market stability, the IEA's Oil Market Report (OMR) today highlighted supply disruptions around the world, "some of which will be with us for some time to come, e.g. Iran and Venezuela, and others that are probably shorter term".

"The large number of disruptions reminds us of the pressure on global oil supply. This will become an even bigger issue as rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit," the IEA said. "We see no sign of higher production from elsewhere that might ease fears of market tightness".

The Paris-based energy watchdog kept its global demand growth forecast little changed, at 1.4mn b/d for both 2018 and 2019. It only slightly tweaked its non-Opec supply growth projections, putting them at around 2mn b/d this year and 1.8mn b/d in 2019. It said US supply growth will slow from 1.7mn b/d in 2018 to 1.2mn b/d next year.

The IEA said the call on Opec crude is 32mn b/d this year and 31.4mn b/d in 2019. Opec yesterday put demand for its own crude at 32.9mn b/d in 2018 and 32.2mn b/d in 2019.

Global oil supply increased by 370,000 b/d to 98.8mn b/d in June from May. "Saudi Arabia and Russia opened the taps ahead of a meeting between Vienna agreement producers", the IEA said.

It said commercial inventories in developed economies grew by 13.9mn bl in May from April, but were 23mn bl below the five-year average.

"Preliminary data show stocks falling in June," the report said.