Commercial oil stockpiles in industrialised nations have fallen below 2016 levels, but the rebalancing of supply and demand still remains a “stubborn process” despite robust consumption, the International Energy Agency said on Friday.
In the second quarter global inventories fell by 500,000 barrels a day to just over 3bn barrels, the Paris-based body said in its monthly oil market report, as supply cuts from big producer countries took effect.
But the IEA said that if the same level of drawdowns continues into the first three months of 2018, stockpiles will remain above their five year average, implying the goal of the cuts agreement will not have been met.
Compliance among participants of the deal, inside and outside Opec, was uneven and could hinder how quickly supply and demand come into balance.
Some producers are “showing signs of weakening their resolve,” the IEA said.
Leading Opec countries met this week in Abu Dhabi to discuss slipping compliance with a deal to curb output.
“The producers that are committed to seeing the task through to March 2018 need to convince the market that they are in it together. It is not entirely clear that this is the case today,” the IEA said.
Opec crude output rose by 230,000 b/d in July to a 2017 high of 32.8m b/d, led by a strong recovery in Libya, which has been exempt from the deal. Even production from the 12 countries that are included in the pact rose, taking compliance with the agreement to 75 per cent – its lowest this year.
In July, global oil supply increased by 520,000 b/d from the month prior as output from non-Opec countries also grew. Production from outside the cartel is expected to expand by 700,000 b/d in 2017 and 1.4 mb/d in 2018. Output from the US provides the bulk of the increase, up by 600,000 b/d and 1m b/d respectively.
Even so, the IEA revised higher global oil demand growth numbers to 1.5m b/d for this year, with total consumption reaching 97.6m b/d. In 2018, growth slows slightly to 1.4m b/d when demand will be 99m b/d.
“Producers should find encouragement from demand, which is growing year-on-year more strongly than first thought,” the IEA said.
But this month’s report incorporates new annual data for 2015 for countries outside of the OECD, which suggests global oil demand for 2015-2018 will be around 330,000 b/d less than initially anticipated.
While still robust, this data implies stock draws later in the year are likely to be lower than first thought, with demand for Opec crude below expectations.