Mubasher: Oil markets are showing signs of tight supplies at the beginning of the second quarter, the International Energy Agency (IEA) said on Thursday, warning against “mixed signals” as far as demand is concerned.
Global markets remained supported owing to the supply curbs led by the Organization of the Petroleum Exporting Countries (OPEC), US sanctions against major oil exporters Venezuela and Iran, and escalating violence in Libya.
OPEC output came in at 2.2 million barrels per day (bpd) in March, down from the levels seen last November, while supplies from non-OPEC producers were 700,000 bpd in the first quarter of this year, compared with the fourth quarter of last year.
“This turnaround in supply has contributed to a dramatic increase in prices, with Brent crude rising from $50 per barrel (pb) at the end of December to more than $70 pb currently,” the energy watchdog said in its monthly report.
The production boom that took place in the second half of last year was reversed by the supply cuts announced by an alliance of OPEC members and non-affiliated producers, including Russia.
Nevertheless, on the demand front, market worries mounted that fuel consumption could be dampened by a build in US crude stockpiles and economic slowdown.
The IEA kept its projection for demand growth at 1.4 million bpd, noting that risks to demand are “currently to the downside.”
“The oil market shows signs of tightening as we move into the second quarter of 2019, but we see mixed signals in terms of the outlook for demand,” the agency said.
While major economies are seeing a resilient performance, overall demand in the Organisation of Economic Cooperation and Development (OECD) nations declined by 300,000 bpd on year over the fourth quarter of last year.
Demand is likely to have dropped again in the first quarter of this year owing to weakness in some European economies, the IEA said.
For emerging economies, uncertainties remained concerning Argentina and Turkey, along with signs of meagre demand recovery in the Middle East.
By 1:48 pm GMT, US Nymex crude futures dropped 0.71% to $64.15 pb, while international benchmark Brent futures fell 0.46% to $71.40 pb.
