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Page added on February 22, 2016
IEA: Oil supply, demand to rebalance in early 2017
The world’s fuel producers probably won’t curb enough oil production to realign crude supply and demand until early 2017, with the United States making up the bulk of the decline, the International Energy Agency says.
And even when the oil market rebalances and buyers begin to draw from oil stocks, the global crude inventory may only register its first annual decline a year later as the market slowly burns off the record amount of oil investors have put in storage. That could hamper any major crude price rallies for a while.
“It is very tempting, but also very dangerous, to declare that we are in a new era of low oil prices,” the Paris-based IEA said in its Medium-Term Oil Market Report for 2016, released early Monday.
“But at the risk of tempting fate, we must say that today’s oil market conditions do not suggest that prices can recover sharply in the immediate future – unless, of course, there is a major geopolitical event.”
The IEA estimates daily production exceeded global demand by on average 2 million barrels in 2015 and will outpace demand by 1.1 million this year and 100,000 barrels in 2017 – the year when the mismatch will eventually revere. The new due date for the oil market tipping the other way is now more than a year beyond what the IEA and many analysts initially expected.
In 2018, the consultancy, which advises 29 oil-importing nations, believes daily global demand will surpass production by 400,000 barrels; later, by 700,000 in 2019 and 1 million in 2020. U.S. crude production is expected to drop 600,000 barrels a day in 2016 and another 200,000 barrels a day in 2017.
Still, the IEA believes investors will put1 million barrels of crude in storage each day this year and that overall crude inventories will still be up slightly in 2017. It’s only 2018 that the IEA’s base case forecast suggests the record-high inventories will drop, by about a quarter-million barrels a day.
Eventually, though, the continued pullback in oil field spending now could erode global production in the future, risking a price spike in later years. The IEA expects global demand will outpace supply by about 1 million barrels a day by 2020.
“The risk of a sharp oil price rise towards the later part of our forecast arising from insufficient investment is as potentially destabilizing as the sharp oil price fall has proved to be,” the IEA said.
The oil bust has also crushed OPEC’s collective revenues, which have fallen from a peak of $1.2 trillion in 2012 to $500 million last year. It could slide further to $320 billion this year if prices stay low, the IEA said.
Yet it doesn’t expect OPEC to rescue the oil market with production cuts. On Monday, The Secretary General of the Organization of Petroleum Exporting Countries and Fatih Birol, executive director of the IEA, will share a stage at IHS CERAWeek in downtown Houston, for a dialogue about new challenges in the energy markets.
“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant future,” Birol said in a written statement.
The IEA expects crude oil producers will put out an additional 4.1 million barrels a day between 2015 and 2021 – less than half the 11 million in growth from 2009 to 2015.
But in five years, oil and liquids production in the United States should reach 14.2 million barrels a day, contributing the most to global production growth over that period. Iran’s output, the IEA said, will jump about 1 million barrels a day by 2021.
16 Comments on "IEA: Oil supply, demand to rebalance in early 2017"
Truth Has A a Liberal Bias on Mon, 22nd Feb 2016 12:49 pm
The KSA air conditioning season usually takes about 450,000 barrels a day out of their exports. Come spring/summer we’ll see an increase in domestic consumption from KSA and likely less production also.
Apneaman on Mon, 22nd Feb 2016 1:18 pm
“…realign crude supply and demand… ”
WTF does that even mean? Is there some Newtonian universal law of alignment I am unaware of? Sounds like more white man bullshit to me. What is the correct “balance” and who gets to decide it? Where does it come from? Another universal law?
shortonoil on Mon, 22nd Feb 2016 3:05 pm
They first said that production would balance in 2015, then 2016, now 2017. They will eventually be right; after the oil age has ended. But since sheep only have a 20 minute memory span, they can just keep plodding the everything will be OK theme. They have to keep the Big Mac manufacturing line going no matter what. It’s all a matter of getting your priorities straight.
shortonoil on Mon, 22nd Feb 2016 3:20 pm
OPEC’S EL-BADRI SAYS 70% OIL SUPPLY OVERHANG IN U.S.
http://www.zerohedge.com/news/2016-02-22/oil-market-shrugs-opec-jawboning
Speaking of memory span, over a year ago we said here that it would require a cut in production of about 4.5 mb/d to bring the price back to this curve:
http://www.thehillsgroup.org/depletion2_022.htm
El-Badri is saying shale is 70% of the over supply, or 3.5mb/d/0.70 = 5.0 mb/d. Maybe some of these guys are catching on? We can hope – but we aren’t holding our breath.
http://www.thehillsgroup.org/
Truth Has A a Liberal Bias on Mon, 22nd Feb 2016 4:29 pm
As soon as Saudi air conditioners kick into full speed we’ll see a lot less exports coming from them. At the same time we’ll see that Irans half million a day increase was a wish and not gonna happen. Things will happen fast this summer, and by things I mean crude oil price increases.
shortonoil on Mon, 22nd Feb 2016 4:41 pm
“Things will happen fast this summer, and by things I mean crude oil price increases.”
Prices are now range bound (see graph above). Prices could go up some, but they will not be enough to compensate for the $2.3 trillion per year in revenue that producers have lost since June of 2014. The days of profitable production are over; never to return! It would take almost 5 mb/d to raise prices by $30. Anything over $30 creates more demand destruction than it creates revenue. It sets a limit to the price.
Truth Has A Liberal Bias on Mon, 22nd Feb 2016 6:57 pm
Dream on short. Prices can go up anytime. Nobody has to come up with 2.3 trillion before demand can exceed supply and the commodity trades for a higher price. You and your bullshit Etp model live in some fantasy realm. How about you publish your Etp model for peer review since it’s about the only thing you have to your credit.
Davy on Mon, 22nd Feb 2016 7:46 pm
How bad does the economy need to get before there is a recognition of a macro global demand destruction event in progress. There is this thinking that oil demand will continue even if economic activity drops seriously. There is this thinking that things won’t get that bad. This is the same thinking that discounts climate change and overpopulation. It is the classic boiling frog syndrome.
This is not a supply thing this is a demand thing. It is even more than a demand thing this is an existential systematic decay. Until there is a recognition of this we will continue to hear about recoveries and higher prices. Recoveries and higher prices are from a different age. We opened a door and stepped into a new reality. We just don’t realize there is no turning back. That door is closed.
Apneaman on Mon, 22nd Feb 2016 9:11 pm
More IEA/industry propaganda featured on the CBC. Everyone’s corrupt and Albertans are fucking retards. Good on ya assholes. Nothing can save the Tar Sands. Ba ha.
Canadian oil production growth could slow down or freeze altogether, warns report
IEA blames slowdown, potential freeze on NDP, environmental concerns and lack of pipeline access
http://www.cbc.ca/news/canada/calgary/canadian-oil-production-slowdown-freeze-1.3458331
JuanP on Mon, 22nd Feb 2016 9:41 pm
This is another IEA forecast that can be safely ignored. I have never read an IEA forecast worth reading, and I’ve been reading them for over ten years. These guys are full of shit, they are nothing more than a Western propaganda tool. Anyone who believes anything these creeps say is an ignorant fool or a naive retard!
Apneaman on Tue, 23rd Feb 2016 12:44 am
And they’re French.
shortonoil on Tue, 23rd Feb 2016 9:20 am
“How about you publish your Etp model for peer review since it’s about the only thing you have to your credit.”
Peer review is used by scientists; we are not scientists, we are engineers. Scientists talk about things; engineers do things. Since you have apparently never been exposed to either, we would suggest that you read “The Structure of Scientific Revolutions” by Thomas S. Kuhn. It is literally the bible for mapping the scientific method.
We have a mathematical model that is based on a universally excepted scientific theory, and has been tested over, and over again on long term historical data. It has displayed a very small margin of error, and has produced projections that have been correct over, and over again. Since it works, and works well we will continue to use it. When it doesn’t – we will let you know. In the meantime, it appears to be the best one available.
If you don’t like the results that the Model generates that is understandable; we don’t either. Unfortunately – what we like, or dislike has absolutely nothing to do with it.
http://www.thehillsgroup.org/
marmico on Tue, 23rd Feb 2016 10:06 am
Quit being a fuctard. The ETP model has been empirically falsified in your own words.
shortonoil on Tue, 23rd Feb 2016 10:41 am
“Quit being a fuctard. The ETP model has been empirically falsified in your own words.”
Now take the nickel that you just earned, and go crawl back under your rock.
marmico on Tue, 23rd Feb 2016 10:47 am
“Quit being a fuctard. The ETP model has been empirically falsified in your own words.”
The ETP model ain’t worth a nickel, fuctard.
shortonoil on Tue, 23rd Feb 2016 12:23 pm
“The ETP model ain’t worth a nickel, fuctard.”
Put your mother’s underwear back in the drawer, and stop picking your nose. It shorting out your brain; or did you bang your head while crawling out from underneath of your bridge.