Economy

Global Oil Supply Edged Lower in August

International Energy Agency has increased its growth estimate for the year to 1.6 million barrels per day.

"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly", the IEA said.

"Demand growth is strengthening: robust demand in OECD (the Organisation for Economic Co-operation and Development) countries was a key factor in 2Q17's global growth of 2.3 mb/d, the highest quarterly year-on-year increase since mid-2015".

OPEC and a number of other producers including Russian Federation agreed previous year on production cuts to ease a global supply glut, but prices haven't risen much above US$50 per barrel as compliance has been a problem.

It was the first fall in global production in four months. Compliance with agreed production cuts among the 12 members bound by the pact rose to 82 per cent from 75 per cent in July. Their compliance for the year so far was 86 percent.

According to a report released by the agency yesterday, strong demand in the second-quarter has helped the oil markets which have been struggling to rebalance, as oversupply had dragged the prices downwards. The country's production was curbed by about 200 000 barrels a day in August and 300 000 a day in September.

"Even if bloated global oil stockpiles continue to decline through this year, OPEC will still fall short of its objective to reduce oil inventories to their five-year norm by the end of 1Q2018".

The agency said global oil supply dropped 720,000 barrels a day last month from July, to 97.7 million barrels a day, largely due to civil unrest in Libya and disruptions to USA production due to Hurricane Harvey.

"Depending on the pace of recovery for the U.S. refining industry post-(Hurricane) Harvey, very soon OECD product stocks could fall to, or even below, the five-year level", added the IEA.

But with oil demand perking up as well as hurricanes and regular summer maintenance knocking out some production, the IEA said it has seen some of that glut disappear. For 2018, the world will need 32.4 million bpd of crude from OPEC.

Supply is also said to have been hampered by Hurricane Harvey in the USA, which caused refineries to shut.

The IEA revised down the global refinery throughput forecast for the third quarter of 2017 by 0.7 million bpd due to Harvey.

The impact of Hurricane Harvey, which struck Texas last month, on global oil markets is "likely to be relatively short-lived", the IEA said. "The rise of the Gulf Coast as a major energy hub means that, in some respects, it can be compared to the Strait of Hormuz in that normal operations are too important to fail", the IEA said.



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