IEA says plenty of oil to meet growing demand for now

The IEA today dismissed talk of a super-cycle in oil, saying that there is "more than enough oil in tanks and under the ground" to keep global oil markets "adequately supplied" for now.

But it said that demand will rise as the economic recovery continues, vaccine programmes gather pace and containment measures ease, and with Opec+ continuing its production restraints this all points to a sharp inventories draw in the second half of this year.

"Oil inventories still look ample compared with historical levels despite a steady decline from a massive overhang that piled up during the second quarter of 2020," the Paris-based energy watchdog said in its latest Oil Market Report (OMR).

Industry stocks in developed economies fell for a sixth consecutive month in January, by 14.2mn bl, but at the end of that month were still 63.2mn bl above the 2016-20 average and 110mn bl higher than a year earlier.

Adding to this is the "hefty amount of spare production capacity" built up as a result of Opec+ supply curbs, the IEA said. It estimates that Opec+ deal has removed 8mn b/d of supply.

The IEA estimates that global oil supply fell by 2mn b/d from January to 91.6mn b/d in February, because of the cold weather that shut-in large swathes of US production and as Saudi Arabia imposed an extra cut of 1mn b/d on top of its Opec+ commitments. It expects non-Opec+ supply to grow by 700,000 b/d this year following a 1.3mn b/d drop in 2020. It forecasts a 180,000 b/d fall in US oil supply, after a 600,000 b/d fall last year.

On the demand side, it said that consumption appears to be "slightly higher than expected" in the current quarter, supported by cold weather in northern Asia, Europe and the US. It sees global oil demand growing by 5.5mn b/d this year to 96.5mn b/d, following an 8.7mn b/d drop in 2020. In last month's report, the IEA forecast demand to grow by 5.4mn b/d this year.

"A stronger economy and vaccine deployment will support growth in the second half of 2021, reducing the oil demand gap vs 2019 from 4.8mn b/d in the first quarter of 2021 to 1.4mn b/d in the fourth quarter," it said.

By Konstantin Rozhnov