Key highlights from IEA’s MOMR

Yesterday, International Energy Agency released its monthly oil market report, which is being seen as the most bullish oil market report in a year. The report suggests a tighter oil market. Here are the key highlights,

• Global oil supply declined in August for the first time in four months. The oil supply in August declined by 720,000 barrels per day in August thanks to lower supplies from OPEC, outages due to Hurricane Harvey, and refinery maintenance. Harvey resulted in production decline in the tune of 200,000 barrels per day in the United States. OPEC production declined by 210,000 barrels per day in August, largely due to Libya’s trouble. IEA also pointed out that the U.S. production was much lower than anticipated even before Harvey hit the United States. Non-OPEC supplies declined more than half a million barrels but still a million barrels higher compared to last year, largely due to increasing production in U.S., Russia, Kazakhstan, Canada, and Brazil.
• The demand side in the report looked even more bullish. IEA revised its growth forecast for oil demand for 2017 to 1.6 million barrels per day, up from 1.5 million barrels per day in July report and up from 1.2 million barrels at the start of the year. According to forecasts, demand in 2017 will reach 97.7 million barrels per day. The second quarter growth in demand was highest in two years at 2.3 million barrels per day from a year ago. The agency said that the demand from OECD countries strong especially in U.S. and in Europe.
• The Harvey also exposed that strategic importance of U.S. Gulf Coast, which exports around 4 million barrels of oil products per day and 0.8 million barrels of crude oil per day. However, the agency says that effect of Harvey would be short-lived in the global market.
• On the inventory side, IEA report shows that commercial inventories broadly unchanged at 3 billion barrels. However, it also notes that refined products inventories in OECD countries are only 35 million barrels higher than the five-year average and it says that depending on the recovery of the U.S. Gulf Coast, the inventories could fall below five-year average.