While the International Energy Agency (IEA) released its latest report showing an easing of global oil supplies and a slight let up in OPEC crude oil production, it also warns that this is not necessarily the “light at the end of the tunnel”; and indeed, it isn’t.
The faintest hint of trouble—such as Iran’s exclusion from a planned output freeze—sends oil back down, as it did on Monday, despite the fact that this really came as no surprise to anyone. Related: IEA Sees “Light At The End Of The Tunnel” For Oil Markets
According to the IEA, global oil supplies eased by 180,000 barrels per day in February, down to 96.5 million barrels per day. The reason for the slight easing was slightly lower global production, including OPEC and non-OPEC.
Total production is 1.8 million barrels per day more than it was a year ago, though. Despite the February decline, OPEC overall has gained. For this year, the IEA is estimating an overall decline in production by 750,000 barrels per day for non-OPEC countries, to reach 57 million barrels per day—or 100,000 barrels per day less than the IEA’s February report.
For last month, OPEC’s crude oil production dropped 90,000 barrels per day, on some small losses in Iraq, Nigeria and the United Arab Emirates, but new production from Iran and the maintenance of the production status quo in Saudi Arabia has kept losses to an overall minimum. Production from Iraqi, Nigeria and UAE combined fell by 350,000 barrels per day in February. Related: Solar Power Is About To Get MUCH Cheaper
We could also expect continued declines of exports coming from Iraq in March as the game over oil-rich Kirkuk heats up. Kirkuk likes in the disputed territories between the Kurdistan Regional Government (KRG) in northern Iraq and the rest of Iraq, controlled by the central government in Baghdad. Last week, the local government of Kirkuk got the KRG’s support to break away from Iraq’s state-run North Oil Company and form their own Kirkuk oil company. Then, on Monday, the state-run North Oil Company said it had stopped feeding the pipeline to Turkey with crude three days prior. Production hasn’t stopped—it’s just being stored instead of exported, and we’re talking about 150,000 bpd.
This OPEC decline has been offset by Iran’s return to the scene, with Iranian output rising by an estimated 187,800 bpd to 3.132 million bpd in February. Related: Why Oil Prices May Not Move Higher
At the same time, the IEA noted, commercial inventories in the OECD countries rose by 20.2 million barrels in January, while global refinery throughputs were estimated at 79.1 million bpd in the first quarter of this year.
When it comes to talks of an output freeze—which were further diluted late last week when Iran said it would not join in a freeze until reached production of 4 million bpd—the IEA is not optimistic. Instead, it says that it is “unlikely that an agreement will affect the supply/demand balance substantially in the first half of 2016”. However, it also noted that production is falling to some extent with or without a freeze agreement, and Iran’s return to the market “has been less dramatic than the Iranians said it would be.”
By James Burgess of Oilprice.com
More Top Reads From Oilprice.com:
- Oil Won’t Stage A Serious Rebound Until This Happens
- OPEC Production Declines Despite Iran’s Efforts
- Oil Falls As Short Covering Seems To Have Run Its Course