IEA sees oil surplus in early 2018

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A lot could change in the next few months but it looks as if the producers' hopes for a happy New Year with de-stocking continuing into 2018 at the same [500,000 barrels a day] pace we have seen in 2017 may not be fulfilled.

Angola's oil output fell further in November, by 108,700 barrels per day according to secondary sources, to a total of 1.581 million barrels per day, according to a monthly report on the oil market of the Organization of the Petroleum Exporting Countries (OPEC) for December. As a result, an initiative by OPEC and Russian Federation to clear a global oil glut by cutting production - previously seen succeeding in the third quarter of 2018 - will take effect more slowly. Despite the price gain, Brent was well below $65.83 a barrel, the June 2015 high touched earlier this week.

The global oil market is expected to show a surplus in the first half of 2018 due to growing USA shale production, a new report suggests.

"But 2018 as a whole is showing a closely balanced market", the IEA said.

The inventory drop managed to boost the oil prices last week; the drops of about 5.1 million barrels per day were stellar and are way past most expectations. OPEC Secretary-General Mohammad Barkindo, speaking to Bloomberg television in Beijing on Wednesday, said stockpiles have since fallen further to about 130 million.

Another cap on prices has been soaring USA production, which has risen by 16% since mid-2016 to 9.78-million barrels a day, the highest since the early 1970s and close to levels from top producers Russian Federation and Saudi Arabia.

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Yet the stronger outlook for supplies elsewhere is blunting the impact of OPEC's strategy.

For three years, OPEC has struggled to rebalance markets amid a surge of USA shale output.

At the end of November, 24 nations that account for around 60 per cent of the world's oil supply agreed at a meeting in Vienna to keep a lid on output for all of 2018 in order to push up prices. For 2018 the IEA also reiterated its prior forecast for growth of 1.3 million barrels a day (1.4%) to a total of 98.9 million.

IEA expects non-OPEC supply to rise by 0.6 mb/d in 2017 and 1.6 mb/d next year.

Speaking at a forum in China, OPEC Secretary-General Mohammad Barkindo, also pointed to the uncertainties concerning the future of the US tight oil supply, "with technology, economics and geology playing critical roles".

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