• 3 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 7 minutes Saudi and UAE pressure to get US support for Oil quotas is reportedly on..
  • 11 minutes China devalues currency to lower prices to address new tariffs. But doesn't help. Here is why. . . .
  • 15 minutes What is your current outlook as a day trader for WTI
  • 15 hours In The Bright Of New Administration Rules: Immigrants as Economic Contributors
  • 9 hours Will Uncle Sam Step Up and Cut Production
  • 1 day Movie Script: Epstein Guards Suspected Of Falsifying Logs
  • 10 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 13 hours Continental Resource's Hamm (Trump Buddy) wants shale to cut production.Can't compete with peers. Stock will drop in half again.
  • 2 hours Domino Effect: Rashida Tlaib Rejects Israel's Offer For 'Humanitarian' Visit To West Bank
  • 1 day Significant: Boeing Delays Delivery Of Ultra-Long-Range Version Of 777X
  • 1 hour Gretta Thunbergs zero carbon voyage carbon foot print of carbon fibre manufacture
  • 6 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 2 days Kremlin Says WTO's Existence Would Be In Doubt If the U.S., Others Left
  • 2 days I think I might be wrong about a 2020 shakeout
  • 2 days China Continued Iran Oil Imports In July In Teeth of U.S. Sanctions
  • 2 days Strait Of Hormuz As a Breakpoint: Germany Not Taking Part In U.S. Naval Mission
Alt Text

What’s Stopping Oil From Breaking Out?

Oil prices inched higher at…

Alt Text

The Bakken Oil Boom Is Facing A New Bottleneck

North Dakota oil drillers might…

Alt Text

Oil Trapped In Narrow Price Band

Oil prices appear to be…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Premium Content

IEA: Market Shows Waning Confidence In Oil Rebalancing

The rebalancing of the oil market is taking too long, the International Energy Agency (IEA) said in its Oil Market Report on Thursday.

Since the record net long position that money managers built in February on hopes that OPEC’s cuts would rebalance the market, investors’—and industry bodies’—confidence has been waning.

“Brent prices have closed below $50/bbl each day since early June and few investors expect a recovery anytime soon,” the IEA said.

Since the start of the production cuts, some issues have been popping up each month to raise doubts about the rate at which the market is rebalancing, the agency noted, adding:

“This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement.”

Libya and Nigeria contributed the most to the 393,000-bpd increase in the cartel’s total crude output in June compared to May. Libya’s output jumped by 127,000 bpd to 852,000 bpd, while Nigerian crude production rose by 96,700 bpd to 1.733 million bpd.

According to the IEA, compliance among OPEC members slipped in June to its lowest level—78 percent—since the start of the deal, as not only exempt Libya and Nigeria pumped more, but also Saudi Arabia. Although OPEC’s biggest producer stayed within the limits, according to OPEC’s secondary sources, it did not overcomply with its share of the cuts as much as it had done in previous months.

“In passing, it is worth noting that compliance from the ten non-OPEC producers who volunteered to cut production improved to 82% in June, higher than the rate achieved by OPEC,” the IEA said.

Last month, global oil supply rose by 720,000 bpd to 97.46 million bpd as producers opened the taps. “Output stood 1.2 mb/d above a year ago with non-OPEC firmly back in growth mode. Non-OPEC production is expected to expand by 0.7 mb/d in 2017 and 1.4 mb/d in 2018.”

As for OECD industry stocks, whose drawdown to the five-year average is OPEC’s key goal with the cuts, the IEA has estimated that OECD industry stocks dropped by 6 million barrels in May on lower imports of crude and products. Stocks were 266 million barrels above the five-year average in May, down from 300 million barrels in April. Preliminary data show a moderate reduction in OECD stocks for June, according to the IEA.

On a positive note, the international agency said that “For global demand, after lacklustre 1.0 mb/d growth in 1Q17, there was a dramatic acceleration in 2Q17 to 1.5 mb/d. For 2017 as a whole, demand is forecast to reach 98.0 mb/d, with growth revised up by 0.1 mb/d compared to last month's Report to 1.4 mb/d. Further growth of 1.4 mb/d is foreseen for 2018, with global demand reaching 99.4 mb/d.”

“Financial data suggests that while output might be gushing, profits are not and recent press reports quoted leading company executives saying that oil prices need to be around $50/bbl to maintain production growth.”

However, the IEA added that “Such is the resilience of the US shale sector that we should be careful to pronounce that its expansion will slow, however it could be that the recent exuberance is being reined in.”

As for when the market would balance, the IEA is no longer as confident as it was in the April report when it said that “it can be argued confidently that the market is already very close to balance”. Related: Are Supermajors Spooked By Peak Oil Demand?

“Taking demand and supply together, the current market balance implies a global stock draw of 0.7 mb/d in 2Q17,” the IEA said today, adding that actual stock numbers currently do not support this picture.

“Thus, we need to wait a little longer to confirm if the process of re-balancing has actually started in 2Q17 and if the waning confidence shown by investors is justified or not,” the agency concluded.  

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play