Global Economy
International Energy Agency expects continued weakness in oil prices
By Michael Hennigan, Finfacts founder and editor
Nov 14, 2014 - 3:04 PM

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The International Energy Agency (IEA), the watchdog for 28 industrialised countries including Ireland, said today that the current oil price weakness is set to persist.

The price of Brent, the international oil benchmark that is used for pricing about two-thirds of international crude supply, has plunged almost 30%  since mid-June to $79 a barrel for January 2015 supply, despite key oil producing countries  – such as Libya and Iraq – engaged in armed conflict.

The Paris-based IEA said in its Oil Market Report (OMR) for November that global oil supply inched up by 35,000 barrels per day (35 kb/d) in October to 94.2 million barrels per day (mb/d), with total supply 2.7 mb/d more than a year earlier as higher year-on-year OPEC production added to non‐OPEC supply growth of 1.8 mb/d. Month-on-month, OPEC output eased by 150 kb/d in October, to 30.60 mb/d, but remained well above the organisation's official 30 mb/d supply target for a sixth month running.

The group's oil ministers meet on 27 November against the backdrop of a 30% price decline since they last gathered, in June. Non‐OPEC production growth is forecast to ease to 1.3 mb/d for 2015.

Global oil demand estimates for 2014 and 2015 were unchanged from the October OMR, at 92.4 mb/d and 93.6 mb/d, respectively. Projected growth will increase from a five-year annual low of 680 kb/d in 2014 to an estimated 1.1 mb/d next year as the macroeconomic backdrop is expected to improve.

OECD industry oil stocks built counter‐seasonally by 12.6 mb in September. Their deficit versus average levels, after ballooning earlier this year, fell to its narrowest since April 2013. Preliminary data show that despite a 4.2 mb draw, stocks swung into a surplus to average levels in October for the first time since March 2013.

OMR subscribers this month also were privy to a detailed look at China's continuing additions to its strategic petroleum reserve as well as a report on how tightening regulations are shifting shipping demand to gasoil from fuel oil.

Highlights of the OMR

  • Oil's rout gained momentum in October and extended into November, with Brent at a four-year low below $80/bbl. A strong US dollar and rising US light tight oil output outweighed the impact of a Libyan supply disruption. ICE Brent was last trading at $78.50/bbl - down 30% from a June peak. NYMEX WTI (West Texas Intermediate) - the US benchmark - was at $75.40/bbl.
  • Global oil supply inched up by 35 kb/d in October to 94.2 mb/d. Compared with one year ago, total supply was 2.7 mb/d higher as higher OPEC production added to non-OPEC supply growth of 1.8 mb/d. Non-OPEC production growth is forecast to ease to 1.3 mb/d for 2015 from this year's 1.8 mb/d high.
  • OPEC output eased by 150 kb/d in October to 30.60 mb/d, remaining well above the group's official 30 mb/d supply target for a sixth month running. The group's oil ministers meet on 27 November against the backdrop of a 30% price decline since they last gathered in June.
  • Global oil demand estimates for 2014 and 2015 are unchanged since last month's Report, at 92.4 mb/d and 93.6 mb/d, respectively. Projected growth will increase from a five-year annual low of 680 kb/d in 2014 to an estimated 1.1 mb/d next year as the macroeconomic backdrop is expected to improve.
  • OECD industry oil stocks built counter-seasonally by 12.6 mb in September. Their deficit versus average levels, after ballooning earlier this year, fell to its narrowest since April 2013. Preliminary data show that despite a 4.2 mb draw, stocks swung into a surplus to average levels in October for the first time since March 2013.
  • Global refinery crude demand hit a seasonal low in October amid peak plant maintenance and seasonally weak product demand. The 4Q14 throughput estimate is largely unchanged since last month's Report, at 77.5 mb/d, as robust Russian and Chinese throughputs offset a steeper-than-expected drop in US runs in October.

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