(Montel) Global oil supply in August reached a record 100m bbl/day as higher output from Opec offset seasonal declines from producers outside of the cartel, the International Energy Agency (IEA) said in its latest monthly report on Thursday.
“Based on our August estimates of production, Opec countries are sitting on about 2.7m bbl/day of spare production capacity, 60% of which is in Saudi Arabia,” the Paris-based agency said in the report.
“But the point about spare capacity is that, having been idle, it is not clear exactly how much, beyond what is widely thought to be 'easy' to bring online, will be available to coincide with further falls in Venezuelan exports and a maximisation of Iranian sanctions.
“It is not just a question of volume; refiners used to processing Venezuelan or Iranian crude will compete to find similar quality barrels to maintain optimal refinery operations,” it said.
Fresh US sanctions against Iran are expected to hit its oil exports from November, while output in Venezuela has fallen to around half the level of early 2016 amid the deteriorating state of its oil sector. In August, Iran and Venezuela pumped an estimated 3.63m bbl/day and 1.24m bbl/day, respectively.
Regarding non-Opec supply, the IEA expects production to expand by 2m bbl/day in 2018, the highest in five years, despite the seasonal dip in August.
“Growth is expected to ease only marginally in 2019, to 1.8 m bbl/day, as a ramp up in Brazilian, Canadian and Russian supplies mitigates a slowdown in the US,” it said.
The IEA kept its oil demand growth forecasts for 2018 and 2019 unchanged from last month, at 1.4m bbl/day and 1.5m bbl/day, respectively.
Yet its outlook comes with some caution.
“Even so, in 2018, we are seeing signs of weaker demand in some markets: gasoline demand is stagnant in the US as prices rise; European demand in the period May-July was consistently below year-ago levels; demand in Japan is sluggish notwithstanding very high temperatures and will be further impacted by the recent natural disasters.”
“As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciations versus the US dollar raising the cost of imported energy. In addition, there is a risk to growth from an escalation of trade disputes.”
It added: “The price range for Brent of USD 70-80/bbl in place since April could be tested. Things are tightening up.”
The benchmark Brent crude contract was last seen trading slightly above USD 79/bbl.