Output cuts to go 'some way' to balancing market OECD stocks back above five-year average Saudi Arabia to maintain record-high supply to China London — The International Energy Agency on Thursday raised its estimates of the "call" on OPEC, or demand for OPEC crude, in the first and second quarters of 2019 by 700,000 b/d and 500,000 b/d respectively, suggesting over-supply could taper off following this month's producer meeting in Vienna and the oil market move "towards" balance. Receive daily email alerts, subscriber notes & personalize your experience. In its monthly oil market report, the IEA cuts its estimate of non-OPEC production growth next year by 415,000 b/d to 1.5 million b/d, largely on the back of Russia's expected contribution to cuts agreed with OPEC last week. Its estimate for non-OPEC output growth next year was already a drop on this year's estimated growth of 2.4 million b/d. The IEA's estimates for the call on OPEC are now 31.4 million b/d in the first quarter and 31.8 million b/d in the second quarter, compared with estimated production in November of 33.03 million b/d, a number that includes Qatar, which has said it will leave the group in January. The report's supply/demand chart suggested only a slight imbalance in the first quarter, and that global oil demand will significantly exceed supply in the second quarter, contrasting with OPEC's own prediction this week of a more over-supplied market. Cuts agreed by OPEC and its partners, together with separate cuts ordered by the Canadian province of Alberta, "may go some way towards restoring balance to the world market," the IEA said. However, it also said OECD oil stock levels had risen above the five-year average in October for the first time since March, to 2.872 billion barrels, reflecting recent production surges, and led by an unusually strong build in crude stocks. The monthly increase in crude stocks, at 46.4 million barrels, was the largest since March 2015 and reflected steep falls in refining in the US and Japan, higher North American crude output, and steady crude imports in Japan and South Korea. The report said reduced global economic expectations pose a risk to its demand growth forecast for next year, which it maintained at 1.4 million b/d. It highlighted Venezuela's shrinking oil consumption, which is now roughly half 2012 levels, and forecast the country's demand will drop from 445,000 b/d this year to 330,000 b/d next year on the back of economic decline, mass emigration and fuel shortages. "The OECD's lower expectation for the world economy in 2019 could reduce oil demand growth by roughly 100,000 b/d," it said. However, lower oil price assumptions are expected to be a "supporting factor," it added. The report said that while Saudi Arabia is expected to shoulder much of the cuts agreed this month, it has recently signed contracts with China intended to sustain recent record-high shipments to that country, pushing up annual exports to China by as much as 600,000 b/d next year. The IEA also raised its estimate of Chinese oil demand growth next year to 445,000 b/d, compared with a growth forecast of 380,000 b/d in last month's report, on the back of buoyant aviation demand. "China lifted a whopping 1.6 million b/d of Saudi crude in November, up 440,000 b/d month-on-month, and the Kingdom is seeking to sustain those record levels and reclaim its rank of top supplier" from Russia, the IEA said, adding that five new supply contracts should help maintain Saudi exports to China next year at 1.67 million b/d. Platts Oilgram News brings fast-breaking global petroleum and natural gas news every day covering supply and demand trends, corporate news, government actions, exploration, technology, and much more. Click on the link below and we will set you up with a free trial. Meanwhile, the IEA estimated Iranian crude production had fallen by 310,000 b/d in November to 3.01 million b/d due to US-led sanctions, and shipments of Iranian oil had fallen by 550,000 b/d to 1.28 million b/d. It noted that some Iranian oil is going into storage, with roughly 14 million barrels stored in seven tankers moored off Kharg Island at the end of November, and some is thought to have gone into storage in China, where National Iranian Oil Company has reportedly leased storage capacity. One factor that might prove bullish overall for oil prices is a surge in freight rates for shipment of oil, resulting from a combination of weather disruptions, greater US exports, and ship demolitions. "Higher global oil production has seen increased demand for shipping and freight rates for crude and product tankers have soared. In particular, Very Large Crude Carrier rates have stayed elevated since reaching a two-year high at the end of October. Rates for Suezmaxes gained $0.45/b month-on-month to the highest in three years, as weather delays in the Turkish Straits hampered movements," the IEA said. --Nick Coleman, nick.coleman@spglobal.com --Edited by Maurice Geller, newsdesk@spglobal.com
Output cuts agreed by OPEC and its allies should help restore stability in the oil market by reducing oversupply of crude , according to the International Energy programme ( IEA ) . The IEA ’s monthly oil price report predicts a rise in demand for OPEC crude of 700,000 barrels per day ( forecast ) in Q1 2019 and 700 bpd in Q2 , while non - OPEC production is expected to increase by 415,000 bpd to 1.5 million bpd next year , mostly from Russian production losses due to the OPEC+ deal . Overall , IEA believes worldwide oil demand will exceed supply in Q2 2019 .