Global oil demand will exceed supply in the second quarter, and even more so until the end of the year, if OPEC extends the production cuts, according to Neil Atkinson, head of oil analysis at the International Energy Agency (IEA).
“It is starting to become clear that if the objective of the OPEC cuts was to flip the market from surplus into deficit that is now slowly beginning to happen,” Atkinson said at the Platts Crude Oil Summit in London on Wednesday, as quoted by MarketWatch.
The market is largely expecting OPEC to extend its production cuts until the end of this year, and Saudi Oil Minister Khalid al-Falih has even hinted at extending the deal into early 2018, citing producers’ resolve to do ‘whatever it takes’ to rebalance the market.
The IEA has been optimistic that the balance will be achieved. As early as its March Oil Market Report, the IEA said that the market needs time to see a significant drawdown, and expected an implied deficit of 500,000 bpd for the first half at current production levels and supply and demand fundamentals.
In its April Oil Market Report, the international agency noted that “It can be argued confidently that the market is already very close to balance, and as more data becomes available this will become clearer.”
With OPEC’s cuts extended through the end of this year, the supply deficit will deepen in the second half of 2017, according to Atkinson.
“If you were to take the IEA’s oil report and look at estimates of what OPEC might do — it might rollover the existing levels — and assume no changes to the demand and supply outlook, you will find that as we move to the second half of the year it is likely that the surplus in demand and supply will grow,” according to the analyst, MarketWatch reports.
By Tsvetana Paraskova for Oilprice.com
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