Global oil demand improves but slowdown still forecast for 2017: IEA

Posted February 11, 2017

Global supplies are now off by 1.5 million b/d or close to the OPEC/Non-OPEC production cut agreement.

The early signs of the first month of OPEC deal suggest that the cartel is coming close to de-livering on its promises.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russian Federation have agreed to cut output by nearly 1.8 million barrels per day during the first half of 2017 to rein in a global fuel supply overhang. Libya raised its output by 700,000 bpd between December and January, according to IEA data, while Nigeria increased production 500,000 bpd. Analysts say continued production growth could cause OPEC members to rethink the current strategy. At the end of 2016, OECD oil stocks were still 286 million barrels above the five-year average and they are likely to remain significantly above average at the end of June, the IEA said. Its allies the United Arab Emirates and Kuwait followed by cutting a combined 310,000 barrels a day. While imports are up 27.5 per cent from the same month past year, they're down 6.4 per cent from December's record 8.6 million barrels a day. Non-OPEC members Russia, Oman and Mexico agreed to shave 558,000 bpd off their production. US producers are taking advantage of higher prices by increasing drilling activity and boosting daily output to the highest level since April, a dynamic the IEA said is capping prices in the mid-$50s.

Qatar was the fourteenth largest total petroleum and liquids producer in 2015 with 2.049 million barrels per day of production. Iran, which was allowed to continue restoring output to pre-sanctions levels, pumped 3.8 million barrels a day, the most since 2010.

According to oil companies and ship-tracking data, the members of the group that pledged to make cuts in Vienna two months ago have implemented 83% of those reductions on average.

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It's clear with the quick resurgence of the shale patch with oil prices back above $50, OPEC is back to competing with shale.

Resilient demand in oil is helping the bid by OPEC to re-balance the oil markets around the world, growing more than had been expected in 2016 and positioned to do the same during 2017. 17 oil rigs were added in the U.S.in the week to February 3, bringing the total up to 583, the most since October 2015.

While IEA did not release an estimate for overall compliance amongst the countries during January, the projections it has released assume a curtail in output.

The U.S. Energy Information Administration (EIA) said gasoline inventories fell by 869,000 barrels last week to 256.2 million barrels, while expectations were for a 1.1 million-barrel increase.