Production outages and Iran and Venezuela will tip the global oil market into a shortage during the second quarter, the International Energy Agency said in the new edition of its monthly Oil Market Report.
This will happen against the background of steadily rising demand despite a slowdown during the last quarter of 2018, the agency said, adding that it had kept its 2019 global demand forecast unchanged from the last OMR at 1.4 million bpd.
The IEA said Venezuela’s oil production had stabilized around 1.2 million bpd before the massive power outage that hit the country earlier this week, noting this is the same amount as the one OPEC and its partners agreed to take off global markets in December in a bid to prop up prices.
While it did not say it expected Venezuelan’s oil production to grind to a halt, further decline is more or less a certainty. However, any serious market disruption should be limited because OPEC members—excluding U.S. sanctioned Ian and Venezuela—are sitting on some 2.8 million bpd in spare capacity. This, with two-thirds of it in Saudi Arabia, could be quickly brought back online to cover any shortages, especially of heavy crude. OPEC has cut mostly its heavy crude oil output. Related: Is This A Precursor For Peak Oil Demand?
Whether the cartel would be willing to do this, however, remains an open question in light of recent comments by the Saudi Energy Minister, who suggested the cuts might have to be extended beyond the April deadline to boost prices enough for the Kingdom’s comfort.
On the other hand, OPEC is likely to face the vocal opposition from the U.S. President as well as India and China if oil gets too expensive for importers’ comfort.
Speaking of importers, the IEA noted the U.S. has started buying a lot more crude from Russia to replace lost Venezuelan barrels. “As exports to the US have slumped following the imposition of sanctions, Russia has taken the opportunity to increase its shipments to the US from relatively modest levels to around 150 kb/d.”
By Irina Slav for Oilprice.com
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