Global oil markets have started to rebalance

Javier Howell
September 16, 2017

Two of the most influential organizations in world oil markets - the International Energy Agency and Opec - nudged their demand forecasts higher, signalling continued erosion of a global glut that has weighed on prices.

"We don't expect a spike up in prices nor do we expect a big drop in prices".

"The red metal is under pressure today as there are reports of heavy selling from commodity funds".

Hurricane Harvey caused substantial disruptions to crude oil and petroleum product supply chains and increased petroleum product prices, according to a recently published report from the U.S. Energy Information Administration (EIA). Growth is forecast to average 700,000 b/d in 2017 and almost 1.5 mb/d in 2018 as higher production from Canada and the North Sea offsets weaker USA and Brazilian estimates. At the same time, oil output rose by the most since 2012 and crude stockpiles expanded by the most since March.

This will support efforts by Opec countries and other producers including Russian Federation, that have combined forces to curb global supplies by around 1.8m b/d to ease inflated oil stockpiles and boost prices.

For the first time in five months, the OPEC output fell, after disorder in Libya mess up flows and other member countries decrease production.

Geoffrey Craig, the oil futures editor for Platts, said markets will be tested by what could be a steady buildup in US crude oil inventories.

It also stated that global oil glut has started to tighten due to stronger European and USA demand and shrinking of output from the Organization of the Petroleum Exporting Countries (OPEC) member nations.

OPEC said inventories in developed economies declined by 18.7 million barrels in July to 3.002 billion barrels, 195 million barrels above the five-year average.

The IEA revised up its forecast for oil demand growth this year, to 1.6 million bpd from 1.5 million bpd. If global supply is taken into account, global supply of oil fell in August by 720, 000 barrels per day.

Should OPEC keep pumping at August's rate, the market would see a small supply deficit next year, versus a 450,000-bpd surplus implied by last month's report.

Other reports by Insurance News

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