International Energy Agency (IEA) said Tuesday that the oil market is adequately supplied despite the increased tensions in the Middle East.
In its monthly report on the oil market, the Paris-based agency stated that “for now, the supply continues to flow and, in the absence a major disruption, there will be a significant surplus in the coming year.”
Energy watchdog IEA also stated that if needed, it could release crude oil in its public stock, which holds about 1.2 billion of crude oil. Half a billion barrels are held by industry obligations.
After Iran launched ballistic missiles at Israel on October 1, oil prices have risen by over 10% in the past two weeks.
Brent prices reached $80 per barrel within a few days, but have since fallen to $74 as the market waits for Israel’s reaction to the attack.
Brent crude is currently trading at $74.30 per barrel, down over 4% since the previous close.
Demand forecasts are poor
The IEA stated that oil demand will grow by just over 900,000 barges per day by 2024 and around 1,000,000 barrels per daily by 2025.
This is a significant decrease from the growth rate of 2023, which was 2.0 million barrels per days.
OPEC cut its predictions for global oil demand growth on Monday.
The cartel expects a demand increase of 1.9 million barrels a day by 2024. This is significantly higher than the IEA estimates.
OPEC estimates that oil demand will grow by 1.6m barrels per a day in 2025. This is around 600k barrels higher than the latest estimates from the IEA.
China’s oil consumption is particularly weak. It dropped by 500,000 barrels a day in August. This was the fourth consecutive month that China saw its consumption decline.
IEA stated:
The non-OPEC+ oil supplies, led by Americas, continue to grow robustly, with gains of approximately 1.5 mb/d this year and next.
IEA also said that China will account for 20% growth in global oil demand in 2024 compared to almost 70% last year.
Achieving adequate supply by 2025
The IEA predicts that the oil market will be in surplus next year.
The supply of oil from non-OPEC countries and their allies will increase this year by 1.5 million barrels a day in both 2024 and 2025.
In its report, the IEA stated that 80% of oil supply growth is expected to come from the Americas.
IEA stated:
Most of the growth will come from the United States, Brazil and Canada, with output increasing by more than 1 mb/d in both years. This will be enough to cover demand growth.
According to the report, oil exports from Libya have also resumed following a hard-won deal that ended the political dispute which had caused the disruption.
OPEC+ has a huge spare capacity for oil production. The IEA reported that “excluding Libya, Iran, and Russia, the effective spare capacity in September comfortably exceeded 5 mb/d.”
The agency said that “global oil stocks provide a buffer even though observed crude oil inventories have fallen by 135 mb in the last four months, to their lowest level since at least 2017, and OECD industrial stocks are still well below their average five-year stock,”
The agency stated that global refined petroleum products have reached three-year highs and are putting pressure on margins in key refinery hubs.
Margin and global inventories: Refined margins
In September, refinery margins continued to decline as cracks in petrol, jet fuel, diesel and diesel fuel deteriorated.
The IEA has predicted that the global crude oil refinery run in 2024 will be 82.8 million barrels a day, down 180,000 barrels compared to its previous forecast.
The refinery runs for the entire year are only expected to increase by 540,000 barrels per day.
Refinery runs will be 83.4 million barrels/day next year, down by 210,000 barrels/day from the previous forecast.
The IEA reported that global inventories fell by 22.3 millions barrels in August. This was primarily due to a draw of 16.5 million barrels from crude oil stockpiles.
Preliminary data suggests that oil stocks continued to fall in September. The agency reported that OPEC+’s supply cuts and the relatively robust refining activities have led to a 135 mb decline in crude stock since May. Product stocks, however, increased by 35 mb during the same time period.
This post Oil Market Remains Well-Supplied Despite Rising Middle East Tensions: IEA could be updated as new developments unfold
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