A glut in the global oil market has not evaporated, with other nations stepping up output after US shale producers cut back amid a sharp decline in prices that began last year, the International Energy Agency (IEA) said yesterday.
In its latest monthly report, the IEA said that global oil supply remained flat at 95.7 million barrels per day last month. Slowing US shale oil output was being offset by higher output from OPEC nations and others, it said.
The agency raised its forecast for non-OPEC production growth this year. It said it expects output by countries outside of the cartel to climb by 830,000 barrels per day to 57.8 million barrels per day.
“As the market continues to rebalance, pockets of supply growth are emerging from unsuspected corners,” the IEA said, adding that Russia and Brazil had coped unexpectedly well with the price drop.
Oil prices plummeted by more than 60 percent from peaks of more than US$100 per barrel in June last year to less than US$50 per barrel at the beginning of this year, as OPEC refused to cut production despite indications of a global supply glut.
The move by the 12-nation cartel, which pumps about 30 percent of global crude, was widely seen as aimed at pushing US shale oil producers, which have higher costs, out of the market.
The boom in US oil production has been one of the biggest developments in the oil market in years, but the IEA said that the price plunge appears to have brought it — at least temporarily — to a close, as the number of shale rigs in use has dropped by 60 percent and stocks decreased for a week last month.
“While the price responsiveness of [US shale oil producers] was widely anticipated, the strong performance of some other sources of non-OPEC supply defied expectations,” the IEA said.
“Russian oil companies seem to be coping exceptionally well with lower oil prices and international sanctions, thanks to a flexible tax regime that lightens their fiscal burden as prices drop, and to steep cuts in production costs that came courtesy of the ruble’s depreciation,” it said, adding that Russian production jumped by a steep 185,000 barrels per day year-on-year last month.
It also highlighted a jump in Brazilian output by 17 percent in the first quarter of the year, as well as gains in China, Vietnam and Malaysia.
Meanwhile OPEC crude oil output continued to climb last month, increasing by 160,000 barrels per day from an upwardly revised jump of 960,000 barrels per day in March, as Iraq and Iran boosted output, and top exporter Saudi Arabia held output above 10 million barrels per day for a second consecutive month, the IEA said.
That took OPEC’s supply to 31.21 million barrels per day last month, its highest since September 2012, the IEA reported.
Moreover, the agency reported that a 14 percent jump in the price for the main US oil contract — West Texas Intermediate — over the past month on indications that US shale oil output was falling was giving those producers “a new lease on life” and that several had boasted of big cuts in production costs.
“It would thus be premature to suggest that OPEC has won the battle for market share,” the report said. “The battle, rather, has just started.”
Barring any unforeseen disruption elsewhere, the agency said that “the market’s short-term fundamentals still look relatively loose.”
The IEA held steady at 1.1 million barrels per day its forecast in global oil demand growth this year, against daily demand of 93.6 million barrels per day.
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