The global oil market is returning to a rough balance, but Russia’s annexation of Crimea has clouded the outlook with both supply and demand growth to slow, the International Energy Agency (IEA) said yesterday.
While the IEA has recently been warning of tight markets as oil demand picks up with a recovery of the global economy, it said stocks had improved and a slowdown in the Russian economy would also help relieve pressure.
The IEA left its global demand forecast for this year roughly unchanged at 92.7 million barrels per day (mbd), and a trim to its forecast for growth in non-OPEC supplies means the global market will need more oil from the cartel later this year.
“One month after the events in Crimea, market watchers are taking stock of their impact on oil markets,” said the Paris-based institution which analyzes energy markets for the world’s top oil-consuming nations.
“Given the still volatile nature of the situation on the ground, there are more questions than answers,” the IEA said in its monthly oil report.
Based on the World Bank’s reduced growth forecast of 1.1 percent for Russia this year, the IEA trimmed its forecast for Russian oil consumption, which it said roughly compensated for upward revisions to emerging market demand in Asia.
The 1.8 percent contraction that the World Bank forecast for the Russian economy this year under its adverse scenario would result in a drop in oil demand by another 0.15mbd to 3.3mbd.
The IEA said that at the current moment the drop in demand growth is counterbalanced by a 0.25mbd decline in the supply growth forecast due to lower expectations of output from Russia and Kazakhstan.
Meanwhile, OPEC will need to pump more crude in the second half of the year to meet demand after its production plunged to a five-month low last month, the IEA said.
Supplies from OPEC members “plummeted” by 890,000 barrels a day to 29.62 million barrels a day last month, the IEA said. That is below the group’s collective 30 million production target and means it will have to raise output in the second half, it said.
OPEC will need to provide 30.6 million barrels a day of crude in the second half, the agency estimated. That is an increase of 350,000 barrels a day from its previous forecast.