In the wake of yesterday’s OPEC oil market report, we have the latest monthly report from the International Energy Agency (IEA) today. While the two differ somewhat in specifics, the general story is the same. Global demand for crude will not grow as quickly as either OPEC or the IEA had originally forecast, and prices will be lower.
The IEA today lowered its forecast global demand growth to 820,000 barrels a day, or a total of 90.6 million barrels a day. Yesterday OPEC forecast demand growth of 800,000 barrels a day for a total of 89.7 million barrels a day.
According to the IEA, OPEC production rose by 150,000 barrels a day in February to 30.49 million barrels a day, due mainly to an increase in Iraqi production. Demand for OPEC crude fell by 100,000 barrels a day, due largely to refinery maintenance in the United States and Europe.
Non-OPEC production fell by 60,000 barrels a day in February to 54.1 million barrels a day, which is still 600,000 barrels a day higher than average 2012 production. The IEA forecasts non-OPEC supply to grow by 1.1 million barrels a day in 2013 to a total of 54.5 million barrels a day.
Whether demand will catch up with supply in 2013 is the big question. Given the weakness in the global economy, betting that crude demand will grow and prices will rise is no better than an even-money proposition.
For a better read than the forecasts from the IEA or OPEC, it is worth paying attention to the price of gasoline at New York Harbor and to compare that to the price of Brent and to the differential between Brent and West Texas Intermediate. Then look at the futures prices and the open interest on the futures market. In the early part of this year, commodities traders and refiners were selling gasoline futures and buying crude futures following the closing of the Hess Corp. (NYSE: HES) refinery. Once the gasoline stores were determined to be sufficiently supplied, crude buying slowed and prices fell.
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