Oil markets are tightening as the global oil stocks surplus that decimated oil prices in 2014 is close to evaporating, according to a monthly report by the Organization of Petroleum Exporting Countries. Getty Images photo by Simon Dawson.
Oil markets balancing on strong compliance with OPEC cuts, Venezuelan unrest
Citing rising energy demand, strong compliance with the OPEC supply cut agreement and disruptions in supply from Venezuela, Libya and Angola, OPEC says oil markets are balancing.
OPEC added that even though US production hit record levels in February, the global crude supply is diminishing.
In its monthly report, OPEC said oil stocks in the developed world fell by 17.4 million barrels in February to 2.854 billion barrels, about 43 million barrels above the latest five-year average.
“We have achieved an over 150 per cent conformity level,” OPEC Secretary-General Mohammad Barkindo told Reuters in New Delhi. He added that the global crude glut has effectively shrunk by ninety per cent since the start of 2017.
“We have seen an accelerated shrinkage of stocks in storage from unparalleled highs of about 400 million barrels to about 43 million above the five-year average,” Barkindo said.
Stock levels now sit 207 million barrels below the level noted in February of last year. Crude stocks are in surplus by 55 million barrels and product stocks are in a deficit of 12 million barrels.
“Looking forward, a healthy global economic forecast for 2018, positive car sales data in recent months, stronger 2018 year-on-year U.S. product consumption in January and potentially tighter global product markets are expected to boost gasoline and distillates demand …,” OPEC said.
“High conformity levels observed by OPEC and non-OPEC producing countries … should further enhance market stability and support crude and product markets in the months ahead.”
OPEC says its collective output is down from February to March by 201,000 barrels per day (b/d) to 31.96 million b/d. The declines are due to production reductions in Angola, Algeria, Venezuela, Saudi Arabia and Libya.
OPEC says it predicts demand for the whole of 2018 to be 32.6 million b/d, which is higher than its current output.
Looking ahead, two oil powerhouses participating in the OPEC supply pact, Russia and Saudi Arabia, say they would like to see the agreement extended into 2019.
“There is growing confidence that the declaration of cooperation will be extended beyond 2018,” Barkindo told Reuters. “Russia will continue to play a leading role.”
According to OPEC, the global demand growth for crude this year is now 1.63 million b/d, up by 30,000 compared to its last report.
“This mainly reflects the positive momentum in the OECD in the 1Q18 on the back of better-than-expected data, and supported by development in industrial activities, colder-than-anticipated weather and strong mining activities in the OECD Americas and the OECD Asia Pacific,” it said in the monthly market report.
Rising production from the United States and former Soviet Union nations will grow by a further 80,000 b/d this year to 1.71 million b/d. As well, crude output from the United Arab Emirates is up by about 45,000 b/d in March to 2.86 million b/d.
Saudi Arabia cut its output in March to 9.907 million b/d, down by 28,000 b/d since February. Venezuela’s production was reported to by 1.509 million b/d in March, down 77,000 b/d from February.