London: The International Energy Agency cut estimates for the amount of crude OPEC will need to provide next year as supplies from North America surge.
Demand for crude from the Organization of Petroleum Exporting Countries will be 29.2 million barrels a day or 1.3 million a day lower than the group’s current production levels, the IEA said on Thursday in its monthly market report.
The impact of supply losses in Libya and threats to exports from the crisis in Syria will be softened as fading seasonal demand allows oil inventories to replenish, the Paris-based adviser to energy consuming nations said.
Despite continued tensions, the recent tightening of oil market fundamentals — the broad bullish backdrop that has arguably heightened the oil market’s sensitivity to the Syrian threat — looks set to give way to somewhat easier conditions in the fourth quarter, the IEA said.
Brent has recovered about 15% from this year’s low on signs the global economy is recovering, and as conflict and political disturbance in the Middle East and North Africa curbs oil supplies. The crude was at $111.62 a barrel on the ICE Futures Europe exchange in London as of 8:46 am local time.
The IEA raised forecasts for global oil demand in 2014 as the world economy recovers. Consumption will increase by 1.1 million barrels a day, or 1.2%, to 92 million. That’s 70,000 barrels a day more than estimated last month.
For next year we still have very strong non-OPEC supply growth, driven by North America, both in the US and Canada, Mike Wittner, head of oil market research at Societe Generale SA in New York, said before the report. Bottom line, the big picture is of a balanced market.
Estimates for supplies outside OPEC in 2014 were bolstered by 260,000 barrels a day. Non-OPEC producers, including the US, Canada and Brazil, will boost output by 1.6 million barrels to 56.1 million next year, according to the report. US production will soar 750,000 barrels a day to 10.9 million as the nation taps shale resources in North Dakota and Texas.
Total inventories of crude and refined products in industrialized nations, which in July were at their tightest in two years, will probably rebound as refiners begin routine maintenance, the IEA said. Stockpiles will probably exceed their five-year average by the end of 2013 even if Libyan output is entirely halted, it said. Inventories were at 2.7 billion barrels in July, or 65 million less than the five-year average.
The agency’s projection for the amount OPEC will need to provide, known as the call on OPEC, was reduced by 200,000 barrels a day for 2014. Production from the group, responsible for about 40% of global supplies, slumped by 260,000 barrels a day to 30.5 million in August as near-record output from Saudi Arabia failed to fully compensate for losses in Libya, the IEA said.
Libyan output plunged to its lowest since the 2011 uprising against Muammar Qaddafi, falling 450,000 barrels a day in August to 550,000 a day, as labour strikes at ports crippled its export capacity. Saudi Arabia boosted production by 190,000 barrels a day to 10.19 million, according to the IEA. BLOOMBERG