OPEC sees global oil demand inching towards 1.5m bpd in 2017

The International Energy Association (IEA), a Paris-based energy think tank based in Paris in its oil market report released last Friday said that global demand is expected to reach 1.5m bpd this year, up from 1.4 m forecast last month.

This would indicate that while global oil market are rebalancing, it is occurring as rapidly as expected. Worse still, this momentum is not expected to change into the first quarter of 2018 when the current OPEC deal where oil output will be cut by 1.8m bpd will have run out.

OPEC output rose by 173,000 bpd a day in July to almost 32.9 m barrels, its highest level since the production agreement came into force in January. This implies that compliance to the OPEC has fallen by close to 5% since January.

“Although stocks are beginning to fall, they’re falling from a great height,” Neil Atkinson, head of Oil Industry and Markets Division at the IEA told CNBC.

It is particularly worrisome that global inventories are rising making the task of rebalancing a tad difficult. The IEA reports that 230million barrels of oil remain in storage and this may require as much as 6 months to cut down significantly, a prospect that does not look promising considering that producers are still pumping.

Improved supply from Nigeria, Libya and shale drillers, have helped led the IEA projecting cuts by as much as 800,000 bpd required by the group this quarter to keep prices slightly above gloomy territory.

The release of the report tripped oil prices and saw them trading around $51/bb few hours on Friday after reaching $53 the day before.

Oil markets seem in a state of flux, a potential fall in production will lead to marginal rise in prices which will send shale drillers back to their platforms. With horizontal drilling technology, they are quicker to get to market and breakeven costs are falling.

ISAAC ANYAOGU