The International Energy Agency Friday cut its estimates of global oil demand growth this year and next by 100,000 b/d each, while raising its estimate of this year's growth in non-OPEC supply to 2.2 million b/d, but said continued strains on the system were likely to lead to higher prices.
In its latest monthly oil market report, the IEA cut its estimates of global demand growth to 1.3 million b/d for this year and 1.4 million b/d next year, citing currency depreciations, trade disputes and a revision to its data on China.
With Brent crude prices now "established" above $80/b, "expensive energy is back, with oil, gas and coal trading at multi-year highs, and it poses a threat to economic growth," the IEA said.
In the current quarter the world has reached "twin peaks for demand and supply by straining parts of the system to the limit. Recent production increases come at the expense of spare capacity, which is already down to only 2% of global demand, with further reductions likely...This strain could be with us for some time and it will likely be accompanied by higher prices," the IEA said.
The IEA raised its estimate of non-OPEC oil supply growth this year from 2 million b/d in last month's report, while it kept the corresponding estimate for next year unchanged at 1.8 million b/d.
Led by US production, "global oil supply is growing at a relentless pace, even as Venezuelan production deteriorates and Iranian flows decline ahead of US sanctions," the report said. The oil market is "adequately supplied for now."
It added that global oil supply was up 2.6 million b/d from a year earlier in September, led by North America and Russia, even as non-OPEC output dropped by 140,000 b/d in August due to seasonal reductions in Canada and Norway. US oil production reached a record-high 15.6 million b/d in July, up 2.4 million b/d year on year, while US offshore production in the Gulf of Mexico rose by 190,000 b/d to a record-high 1.85 million b/d, it said. The US "remains the engine of non-OPEC supply growth, propelled by expansions in the shale patch and rebounding output offshore," it said.
CALL REDUCTION
Reflecting these new forecasts, the IEA cut its estimates for the "call" on OPEC crude, or need for OPEC production, reducing its call estimate for next year by 300,000 b/d to 31.6 million b/d and for the first quarter by 500,000 b/d to 30.8 million b/d.
The IEA said the OPEC and non-OPEC countries that joined in the so-called "Vienna" agreement to cut production in 2016 had raised their output by 640,000 b/d since May, when they agreed to ease production cuts, and by 1.2 million b/d when Iran and Venezuela were excluded from the calculation.
It said Libyan output had risen by 80,000 b/d to 1.06 million b/d in September, an over five-year high, while Nigerian output was also up, by 50,000 b/d, at 1.71 million b/d, its highest in over two years due to an accelerating loadings of Qua Iboe crude.
The IEA said Iran's oil output, including natural gas liquids, had fallen to a two-and-a-half-year low of 3.45 million b/d in September in the run-up to next month's reinstatement of sanctions by the US, while its sale of crude oil had fallen to 1.63 million b/d, some 800,000 b/d below recent peaks in Q2.
It estimated OPEC crude output had risen by 100,000 b/d in September to a one-year high of 32.78 million b/d.
On stock levels, the IEA said stocks in the OECD countries had risen by 15.7 million barrels in August to 2.854 billion barrels, the highest since February, but 34 million barrels below the five-year average, maintaining the stability seen since May.
