Oil in Global Economy Series: Key highlights from IEA’s OMR

The International Energy Agency (IEA) released its monthly oil market report. The watchdog warns of a slowdown in demand amid tight supplies. Here are the key highlights,

Global supplies:

• Global oil supplies declined for the fifth consecutive month in March. It declined by 0.34 million barrels per day thanks to greater compliance with the new OPEC agreement and production cuts by non-OPEC countries after declining by 1.2 million barrels per day in January and by 0.95 million barrels in December.
• However, thanks to higher production in the U.S. and other non-OPEC countries, the supplies are higher by 0.53 million barrels per day, from a year ago.
• The supplies have declined sharply since November and by 3.1 million barrels per day.
• IEA expects non-OPEC supply growth to slow down to 1.7 million barrels per day in 2019 after a record gain of 2.8 million barrels per day in 2018. The figures are higher than December when IEA forecasted 1.6 million barrels growth but lower than last month’s 1.8 million barrels estimate.  The revision is largely due to production decline in non-OPEC countries other than the United States.

OPEC supplies:

• According to IEA’s calculations, OPEC production was 30.1 million barrels per day (4-yr low) in March, down 2.72 million barrels from December as Saudi Arabia, UAE, and Kuwait reduced production, while Venezuela and Libya saw production dwindle due to geopolitical uncertainties.
• According to IEA, compliance with the new OPEC agreement has hit 153 percent.

Global demand:

• IEA maintained its global oil demand growth forecast at 1.4 million barrels per day for 2019. IEA expects new petrochemical projects in China to provide support demand growth, while weaker demand from the U.S. would keep things checked. Refinery demand rising fast in China, accounting for 90 percent of the global growth.
• While demand from India, China, and the United States grew by 1 million barrels per day in the first two months of the year, overall OECD demand declined in the last quarter of 2018 and in the first quarter of this year due to weaker European numbers.

Global inventories:

• On the inventory side, IEA report shows that OECD commercial stocks declined by 21.7 million barrels in February, the 3rd decline in 8 months.
• OECD commercial stocks are currently at 2,844 million barrels.
• According to IEA, OECD holdings are higher than the 5-year average.

WTI is currently trading at $54 per barrel and Brent at $8.9 per barrel premium to WTI.