IEA: Global Supply Close to Balance
The International Energy Agency reported yesterday that global supply and demand for oil is beginning to balance out. According to the IEA, oil stocks from developed countries fell by 17.2 million barrels in March. This follows an 8.1 million barrel reduction in these stocks in February, as demand outpaced supply by approximately 200,000 barrels per day in the first quarter of 2017.
While stocks remain 330 million barrels above the five-year average, the IEA gave several possible explanations for this discrepancy: The overage could be held at sea (either in transit or storage) or in less developed countries not included in the analysis and for which less data is generally available. It also is possible that demand is overstated or supply is understated in the IEA’s estimates.
Other indicators suggested more time was needed to fully assess the supply-demand balance. Typically, demand for crude oil declines in the first quarter, when refineries close for maintenance. And, given the 2-month delay between oil exports leaving the Gulf States and arriving at their destination, the full extent of OPEC supply cuts have not been felt. In addition, following the end of sanctions last year, Iran continued selling the 28 million barrels of oil that it had stockpiled offshore, adding a short-term supply burst to the market. The IEA also noted that OPEC compliance with the output cut was 99% in March. At the same time, data showed weaker-than-expected growth in oil demand in a number of countries.
The IEA voiced confidence that the market is very close to balance and believed additional data in the coming weeks will make this prediction clearer.