Issue 106 – Oil Demand Strong
Introduction…World oil demand will grow more than expected this year, helping to ease a global glut despite rising production from North America and weak OPEC compliance with output cuts, the International Energy Agency said on Friday.
The 2017 demand growth forecast to 1.5 million barrels per day (bpd) from previous month report of 1.4 million bpd. The report said it expected demand to expand further next year.
OPEC is cutting output by 1.2 million bpd. while Russia and other non-OPEC producers are cutting production by 600,000 bpd until Mach 2018.
Compliance by OPEC cuts in July fell by 75%, the lowest level since cuts began in January according to the IEA.
The net result is the overall oil supply in July rose by 520,000 bpd which is 500,000 bpd abovet last year’s levels.
The strain on oil producers to support oil prices as the non-OPEC output is expected to expand by 0.7 million bpd in 2017 and by 1.4 million bpd in 2018. There are strong gains in U.S. production as we are not participating in the output caps.
In conclusion…Strong oil demand growth is helping to clear the excess oil inventories in industrialized nations in both June and July.
Source: Dmitry Zhdannikov, “IEA Says strong oil demand growth helping market rebalance,” Reuters, 11 Aug 2017.