12th May 2016
Global oil markets are heading towards equilibrium the International Energy Agency (IEA) has said in its latest oil report.
The IEA believes that a rebalancing of supply and demand is becoming evident from the data, with demand resilient while the surplus of oil could start to shrink later this year.
It notes that world output grew by just 50,000 barrels a day in April versus gains of more than 3.5 million barrels a day a year ago and notes that 2016 non-OPEC supply is forecast to drop by 800,000 barrels a day.
It expects an increase in global oil stocks in the first half of the year, then a fall.
It says: “The net result of our changes to demand and supply data is that we expect to see global oil stocks increase by 1.3 million barrels a day (mb/d) in the first half of 2016, followed by a dramatic reduction in the second half of 2016 to 0.2 mb/d.”
The IEA’s Oil Industry and Markets Head Neil Atkinson told CNBC that this does suggest any big increase in oil prices.
He said: “The problem we’ve got is that if you want to see higher oil prices in the rest of 2016, what you need to remember is that oil stocks are at very, very high levels – even if they’re going to grow by a very small amount compared to what we’ve seen and they’re not likely to start falling until 2017. So there’s a big buffer or big dampener on prospective rise in oil prices by the fact that these enormous stocks do exist and will exist for some time to come,” he said.
The IEA noted that stocks of oil in OECD are falling.
In terms of demand, the IEA has left its outlook for global oil demand growth in 2016 at a “solid” 1.2 mb/d, unchanged from last month.
Interestingly, it said India was the “star performer” in terms of oil demand growth. Oil demand from the rising Asian powerhouse was 400,000 barrels a day higher in the first quarter from the same period last year, “representing nearly 30 percent of the global increase” in demand.