Mubasher: Oil prices are unlikely to see the same ‘sharp’ rise seen starting mid-2017 in the coming period, which is likely to reduce ‘the dampening effect on demand,’ the International Energy Agency (IEA) on Wednesday said.
The agency revised its global crude supply forecast, from members outside the Organization of Petroleum Exporting Countries (OPEC), to a 2 million barrels per day (bpd) rise for the year. It added that 2019 was also likely to see “bumper growth, albeit slightly reduced” of 1.7 million bpd.
US oil production is set to increase by 1.3 million bpd in this year, and by 900,000 bpd in 2019, accounting for 75% of the total expected supply increase outside of OPEC across 2018 and 2019, the IEA said in its monthly Oil Market Report (OMR).
This comes amid indicators that the US takeaway capacity is lagging behind production growth, while additional pipeline capacity in Texas is set to reach a net 575 Kelly Bushing/day (kb/d) by the end of 2019, with the most output coming online in the second half of the year.
Global oil demand is expected to surge to 1.4 million bpd in 2019, IEA said in an estimate update, citing a growing petrochemicals sector, with projects being streamlined earlier than previously thought.
In addition, measures under consideration in Argentina, Brazil, India, Indonesia, Russia, and Turkey would also buttress global demand, enabling consumers to cope with higher prices.
However, demand would fall on the back of possible price rises, trade protectionism, weakening economic confidence, and a stronger US dollar, the Paris-headquartered oil organisation warned.
IEA also said that the Venezuelan and Iranian short exports would feature on the agenda for the OPEC meeting in Vienna slated for 22 June.
The agency also concluded, from a given scenario, that crude output from these two sanctioned countries’ output could plummet by 1.5 million bpd than current figures.
In response to such supply shortage, OPEC would ramp up production by 1.1 million bpd, added to more output from Russia.
IEA assumed that the oil market would be fairly balanced, yet vulnerable to price hikes in case of another supply disruption.
By 12:24 GMT, US Nymex futures went down 0.56% to $65.99 per barrel (pb), while Brent crudes edged down 0.04% to $75.85 pb.