While cutbacks by OPEC and Russia since January have
brought world markets “very close to balance” and should deplete stockpiles in
the second quarter, inventories nonetheless expanded “marginally” because of
production increases just before the deal took effect, the IEA said in its
monthly report on Thursday. The agency lowered estimates for global demand
growth because of weaker than expected economic activity in
Crude prices rallied last year as the Organization of Petroleum Exporting Countries and Russia announced their joint effort to end a three-year oil glut, yet gains have stalled on signs the cuts aren’t working quickly enough and are encouraging rival US shale drillers to fill any shortfall.
“Global stocks might have marginally increased in the first quarter,” said the Paris-based agency, which advises most of the world’s major economies on energy policy. While “this might be surprising as it comes after the implementation of OPEC output cuts,” it reflects the group’s export surge late last year.
US crude futures traded 7 cents higher at $53 18 a barrel on
the New York Mercantile Exchange as of 12:31 p.m.
Read also: Global oil stocks on the rise again
“Inventories are the barometer of global oil market re-balancing,” said Neil Beveridge, an analyst at Sanford C. Bernstein & Co. “Despite OPEC cuts, global inventories showed a bigger than expected build in the first quarter. Recent data however points to sharp inventory declines in the second quarter as the delayed impact of OPEC cuts finally starts to filter through.”
Stockpiles will decline by about 1.2 million barrels a day in the second quarter if the group maintains current output levels, and by 1.6 million a day if it extends the curbs into the second half, the IEA’s data indicates.
The IEA trimmed forecasts for global oil demand growth this
year by about 100 000 barrels a day to 1.3 million a day, or 1.4 percent, as a
result of weaker OECD consumption and economic activity in
OPEC achieved 99 percent of its promised supply reduction
through March as
The group’s output dropped by 365 000 barrels a day to 31.68 million a day, the IEA said. OPEC’s 11 partners in the accord delivered 64 percent of their pledged cuts, their strongest adherence since the deal began.
While such a decision would reduce oil inventories and
support prices, it would “offer further encouragement to the
The agency boosted estimates for growth in non-OPEC supplies this year by 90 000 barrels a day to 485 000 a day amid “robust activity in the US” Drilling has more than doubled since May, as the price recovery draws investment back to the nation’s shale-oil industry, data from Baker Hughes Inc shows.