IEA’s oil price pressures may be short-lived

The IEA has been struggling to find reasons to call on producers to help soften high oil prices for some time, and this month is no different.

With surging volumes of US shale oil, sliding demand in the OECD, muted Chinese growth and amble industry oil stocks, you know things are probably all well with global oil balances when the West’s oil consumer watchdog calls the market “well supplied.”

But in its latest monthly oil market report, the IEA still found motives to caution over a likely return to climbing oil prices in the coming months. In New York, NYMEX crude futures were trading around $93.50/b Thursday, close to $17/b less than in early September. But the IEA warned that the recent easing of prices may be “relatively short-lived.”

On one hand, non-OPEC oil supplies continue to climb sharply. In October they jumped month on month by 740,000 b/d to reach a record 55.53 million b/d, according to the IEA. The increase is underpinned by US shale which,the IEA believe will push the US ahead of Saudi Arabia by 2015 as the world’s biggest oil producer.

A steeper than usual 3.6 million b/d fall in refinery runs since July have also suppressed recent crude prices and OECD oil inventories built counter-seasonally in September, the IEA noted.

On the flip side, the IEA pushed up its estimates for global oil demand, (again) for 2013 and 2014 albeit by less than 50,000 b/d. It said revised data from August showed higher oil consumption than it had previously seen, forcing the latest revision.

At the same time, while refinery throughputs look set for a steep rebound in November and December, ongoing production problems in Libya, Iraq and Nigeria continue to cloud the supply horizon, according to the IEA.

Even if the IEA’s latest market niggles prove out to be well grounded, any impact on oil prices is likely to be short-lived.

The bottom line, at least for the short term, is that the estimated “call” on OPEC’s crude for 2014 overall stands a 29.1 million b/d, which is still 900,000 b/d below the group’s current output target. And next week in Vienna, OPEC minister by all accounts will roll that ceiling over again.

Platts