Demand for OPEC’s crude will be higher in the second half of the year than previously estimated as inventories in developed economies remain depleted, according to the International Energy Agency.
The Organization of Petroleum Exporting Countries will need to provide an average of 30.7 million barrels a day in the second half, or 800,000 a day more than it pumped last month, the IEA said today. This calls for 140,000 more barrels of OPEC crude than the IEA forecast in April as stronger-than-expected demand has kept stockpile levels “tight” in advanced nations, the agency said. OPEC controls about 40 percent of global supplies.
“Forecast balances call for a significant rise in OPEC production from current levels for the second half of the year,” the Paris-based adviser to oil-consuming nations said in its monthly report. “While OPEC has more than enough capacity to deliver, it remains to be seen whether it will manage to overcome the above-ground hurdles that have plagued some of its member countries lately.”
Brent crude futures have been steady this year, trading near $110 a barrel in London today, as concern that the crisis in Ukraine may lead to a disruption in Russian energy supplies, and the protracted disruption to Libyan exports, are countered by slowing economic growth in emerging nations such as China.
Production among OPEC’s 12 members rebounded from a five-month low in April, by 405,000 daily barrels to 29.9 million, largely because of a recovery in Iraqi output and increases by Saudi Arabia, according to the report. Members are expected to keep their formal target of 30 million barrels unchanged at their next meeting on June 11 in Vienna, according to the IEA.
Iraq’s production rose by 140,000 barrels a day to 3.34 million as the start of new projects in the south of the country compensated for the prolonged curtailment of exports from the north due to pipeline sabotage, the IEA said. Saudi Arabia, the group’s biggest member and de facto leader, bolstered supplies by almost 100,000 barrels a day to 9.66 million.
The agency raised forecasts for global oil demand in 2014 “marginally,” by 65,000 barrels a day, following stronger-than-expected growth in the first quarter in Japan, the U.S., Germany and the U.K. World fuel consumption will increase by 1.3 million barrels a day, or 1.4 percent, this year to average a record 92.8 million barrels day.
Inventories of crude and refined oils remained “tight” at the end of March in developed nations, at a “wide” deficit of 110 million barrels to their five-year seasonal average, according to the report. Stockpiles in the 34 nations that make up the Organization for Economic Cooperation and Development were at 2.57 billion barrels in March, down 2.5 million from the previous month.
Still, preliminary data indicate that stockpiles surged in April by 52.1 million barrels, narrowing their deficit to the five-year average to 79 million barrels, according to the report.
The agency trimmed estimates for production growth outside OPEC in 2014 because of lower-than-expected output from Azerbaijan, China, Colombia, Kazakhstan, Mexico and South Sudan. Non-OPEC producers, led by the U.S., Canada and Brazil, will increase output this year by 1.5 million barrels a day to an average of 56.1 million. The level of growth is about 100,000 barrels a day lower than last month’s projection.