IEA: oil market could be tipped into deficit


Back in mid-February, Paris-based IEA raised its forecast for oil demand growth in 2018 to 1.4 million barrels per day, from a previous projection of 1.3 million bpd, despite OPEC saying their supply cuts would continue.

LONDON-Oil prices were mixed Thursday morning, as investors weighed signs of growing global oil demand and surging U.S.shale production.

Meanwhile, OPEC admitted that the United States shale boom has offset the cartel's supply quota plan.

"Within the OPEC countries, the biggest risk factor is, and will likely remain, Venezuela", the IEA said in its closely-watched report published today.

WTI for April delivery traded at $61.25 a barrel on the New York Mercantile Exchange, up 29 cents at 9:39 a.m. local time, after rising 25 cents on Wednesday.

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The group said non-Opec producers would boost supply by 1.66-million barrels a day in 2018.

U.S. crude futures initially tumbled after the U.S. Energy Information Administration reported that inventories of crude oil rose by 5 million barrels - double what analysts surveyed by The Wall Street Journal had anticipated, and significantly more than the 1.2 million-barrel build reported by industry group the American Petroleum Institute on Tuesday.

"Prices in the upper half of the oil price-band will encourage increased supply as USA production grows and countries reduce compliance with their production quotas", said Terry Marshall, a Moodys Senior Vice President.

OPEC and other producers led by Russian Federation began cutting supply in January 2017 to erase a global crude glut that had built up since 2014. Oil inventories happened to climb in January for the first time since July 2017, but only increased by 18 million barrels, or about half of the usual rate for that time of year.

The IEA's latest five-year outlook documented oil discoveries falling last year to a record low.

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USA crude futures fell 0.8% to $60.23 a barrel, with Brent crude down 0.8% at $64.15. In even the most pessimistic case, tight oil grows by another million barrels per day (BPD) from 2017 levels by about 2022.

The agency made minor adjustments its annual forecasts, under which rising United States output is expected to helping meet increased demand while OPEC and its partners restrain production.

"(It suggests) the rebalancing can't go much further from here and according to the Opec report, demand for Opec'S oil must be 33 million barrels per day for the rest of the year to get rid of any remaining oversupply".

Prices were receiving support from healthy demand.

Traders of crude oil cargoes face a dilemma.

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All this points to American crude output exceeding expectations in output terms; within OPEC, Iran is lobbying to keep oil prices at US$60, fearing that a US$70/b target will only encourage additional U.S. shale output.