By David Hunn
The oil market may finally be stabilizing, but don’t expect a boom in oil prices, according to a report released early Tuesday by the International Energy Agency.
In its first forecast for 2017, the Paris-based agency said global oil demand has been steadily rising and will continue into next year, reaching 97.4 million barrels per day — a boost of about 2 million barrels per day, the report estimated. At the same time, thanks largely to outages in Canada and Nigeria, global production levels have dropped, to 96.5 million barrels per day last quarter. The IEA called it the first “significant” drop in supply since early 2013.
“Even in January when the price of oil fell to its lowest level since November 2003, we knew that the oil market would rebalance in the reasonably foreseeable future,” the report said.
Two main factors, the report said, have “transformed” the oil market outlook:
The demand for oil this year grew by 400,000 barrels per day more than initially expected, fueled first by use in India and now by American drivers. The June report projected gasoline demand in the United States will balloon by 3 percent, or 255,000 barrels per day, this year.
Meanwhile, oil production and distribution have been hit by a series of unexpected disasters.
Canadian wildfires, at their most destructive, cut oil sands output by 1.5 million barrels per day, the report said. In Nigeria, militant sabotage forced production “down to 30-year lows.” And Libya is a “long way” from producing at levels seen before its civil war. Widespread political and social turmoil in Venezuela may soon affect oil operations also, the IEA said.
Moreover, low oil prices are driving down production in non-OPEC countries, the report said. IEA expects a dip of 900,000 barrels per day this year, including 500,000 barrels per day in U.S. shale output.
All told, IEA predicted a balanced oil market this year and next.
“But we must not forget that there are large volumes of shut-in production, mainly in Nigeria and Libya, that could return to the market,” the report said. This year’s strong start “might not be maintained,” it continued.
Producers have stockpiled less oil than the agency originally believed. In January, the IEA estimated surplus supplies would reach 1.5 million barrels per day in the first half of this year. But on Tuesday, the IEA adjusted that estimate down, to less than a million barrels.
Still, the report called that “an enormous inventory overhang to clear,” and said the stock piles “dampen prospects of a significant increase in oil prices.”
Oil was trading at $48.32, down 56 cents, in New York at about 11:45 a.m. Central.