Baku, Azerbaijan, July 12
By Leman Zeynalova – Trend:
There is a potential for oil oversupply next year, with a 2.1 mb/d expansion of non-OPEC supply, led by the US, versus 2 mb/d in 2019, Trend reports citing the Oil Market Report of the International Energy Agency (IEA).
“That will lower the requirement for OPEC crude, with the call on OPEC plunging to 28 mb/d in 1Q20. OPEC has not produced at such a low level since 3Q03. Global refining throughput in 2Q19 dropped 0.7 mb/d y-o-y, the largest annual decline in 10 years. Our estimate for 2019 growth is revised down to 300 kb/d, but refined products stocks build nevertheless. East of Suez refiners are more exposed to products oversupply, while Atlantic Basin runs have fallen back to 2014 levels,” reads the report.
IEA experts point out that in 1H19 oil supply has exceeded demand by 0.9 mb/d.
“Our latest data show a global surplus in 2Q19 of 0.5 mb/d versus previous expectations of a 0.5 mb/d deficit. This surplus adds to the huge stock builds seen in the second half of 2018 when oil production surged just as demand growth started to falter. Clearly, market tightness is not an issue for the time being and any re-balancing seems to have moved further into the future,” said the report.
In the meantime, the widely-anticipated decision by OPEC+ ministers to extend their output agreement to March 2020 provides guidance but it does not change the fundamental outlook of an oversupplied market, according to IEA.
“On our balances, assuming constant OPEC output at the current level of around 30 mb/d, by the end of 1Q20 stocks could increase by a net 136 mb. The call on OPEC crude in early 2020 could fall to only 28 mb/d.”
Clearly, this presents a major challenge to those who have taken on the task of market management, IEA believes.
“The picture will evolve as 2019 progresses, but in the near term the main area of focus remains demand growth,” the report reads.
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