In its monthly Oil Market Report for June released Wednesday morning, the International Energy Agency (IEA) said that global crude supplies held rose by 276,000 barrels a day to lift total supply to 98.7 million barrels per day. That’s 2.2 million barrels a day higher than at the same time last year. This month’s report also contains the IEA’s first estimates for 2019.
The agency said OPEC supply “crept higher” in May and forecasts growth in non-OPEC supply to grow by 2 million barrels a day this year before easing off to growth of 1.7 million barrels a day in 2019. U.S. production is forecast to account for about 75% of the supply growth in both years.
Demand growth of 1.4 million barrels a day in 2018 is unchanged since last month’s report and the first estimate for demand growth in 2019 calls for an additional 1.4 million barrels a day. The IEA attributes 2018 growth to cold weather in the northern hemisphere and expects demand growth to slow in the second half of the year.
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OPEC crude oil production in May inched up by 50,000 barrels a day to 31.69 million barrels with higher flows from Saudi Arabia, Iraq, and Algeria offsetting declines in Nigeria and Venezuela. The major issues for 2019 supply are the impact of new sanctions on Iranian exports and the continuing decline in Venezuelan production. The IEA commented:
In Iran’s case, we assume a loss of exports close to that seen in the last round of sanctions, recognising that this remains uncertain and a broader range of outcomes is possible. No judgement was made as to which countries will cut back purchases. For Venezuela, we assume no respite in the production collapse that has taken 1 mb/d off the market in the past two years.
The two issues combined could remove 1.5 million barrels a day. The IEA notes that OPEC could fairly quickly raise production by 1.1 million barrels a day to offset the projected losses. Russia’s spare capacity has been estimated at 120,000 to 150,000 barrels a day and state-controlled oil company Rosneft has already raised production by 70,000 barrels a day according to a report last week from Bloomberg.
OPEC and its partners, including Russia, will make a decision on whether or not to raise production quotas following the cartel’s June 22 meeting. Even if the group raises quotas and U.S. production grows as expected, crude oil supplies in 2019 will be “finely balanced” according to the IEA.
Commercial stockpiles in the OECD countries declined in April by 3.1 million barrels to stand at 2.81 billion barrels, a three-year low.
Early Wednesday morning, WTI crude for July delivery traded at $66.02 a barrel, down about 33 cents compared with Tuesday’s closing price of $66.36. Brent crude for August delivery traded down about 0.1% at $75.78 a barrel in London.
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