Oil prices under threat from demand pressures in coming months: IEA

London (Platts)--14Nov2013/1048 am EST/1548 GMT

The global oil market is currently well supplied but growing demand pressures and ongoing disruptions in some OPEC producing countries could soon reverse a recent spate of softer oil prices, the International Energy Agency said Thursday.

In its latest monthly oil market report, the IEA also raised its estimates for world oil demand growth this year and warned that oil demand is poised for a seasonal increase in the coming months.

"For now global oil markets seem well supplied," the IEA said. "(But) if seasonal cycles in crude and product demand are any guide, the recent easing of prices may be relatively short-lived."
Noting a softening in global oil prices since September, the IEA said that the impact of surging North American production and sharply lower refining runs may soon be reversed. Front-month Brent crude was trading under $108/b earlier Thursday, a fall of more than $8/b since recent September highs. In New York, NYMEX crude futures was trading about $93.50/b, close to $17/b lower than in early September.

End-user demand is now on the verge of a seasonal ramp-up, and refinery crude throughputs are poised for a "steep" rebound in November and December, the IEA said.

"Meanwhile production problems in Libya and Iraq, among others, continue to relentlessly fester, and may prove more market-supportive in a context of rising demand than they have been during the recent season," the IEA said.

The IEA raised its global oil demand growth estimate by 45,000 b/d to 91 million b/d for 2013 to reflect signs of higher-than-expected oil product deliveries, particularly in Europe. It said several countries accounted for adjustments to demand figures for August, led by Chinese Taipei, the UK, Turkey and Belgium.

As a result, the 2013 demand growth forecast was also raised by 50,000 b/d to 1 million b/d.

For 2014, global oil consumption is expected to average 92.1 million b/d in 2014, little changed from last month's report, but the forecast growth rate was trimmed by a marginal 30,000 b/d to 1.1 million b/d, the IEA said.

RECORD NON-OPEC SUPPLY

The IEA said global supplies in October rose 600,000 b/d to 91.8 million b/d, with a surge in non-OPEC output only partially offset by lower OPEC production.

Helped by booming US shale output, non-OPEC supplies in October jumped month on month by 740,000 b/d to reach a record 55.53 million b/d, the IEA said.

On Wednesday, the US Energy Information Administration said the country's domestic production in October exceeded its imported crude for the first time in 18 years, hitting 7.7 million b/d.

Including biofuels, the US is estimated to have already surpassed Russia as the world's biggest non-OPEC liquids producer and the IEA believes the US will replace Saudi Arabia as the world's biggest oil producer in 2015.

Based on the latest production data, the IEA raised its non-OPEC supply growth estimate for 2013 by 100,000 b/d 1.3 million b/d. The 2014 forecast was increased slightly to 1.8 million b/d.

OPEC crude oil supply in October fell for the third month running, down 105,000 b/d at 29.89 million b/d, with Saudi cutbacks leading the downturn.

Saudi Arabia's oil production averaged 9.75 million b/d in October, down 370,000 b/d from the previous month and below the 10 million b/d mark for the first time in three months, the IEA said.

As a result of the lower production, the IEA estimated OPEC's effective spare capacity at 3.32 million b/d in October compared with 2.90 million b/d in September.

Iraqi crude oil output partially recovered in October, up 150,000 b/d at 2.97 million b/d, but the IEA noted that worsening security problems in recent weeks will likely hit output this month.

Meanwhile ongoing security related setbacks in Libya and Nigeria are continuing to hamper output from the OPEC producers.

Libyan oil production was estimated to have growth by 150,000 b/d to average 450,000 b/d in October but fell again to 250,000 b/d in early November amid worsening political turmoil and labor disputes, the IEA said. Nigerian output was estimated to have fallen slightly in October, down 55,000 b/d to 1.99 million b/d.

The IEA also noted that OPEC ministers are expected to maintain their formal 30 million b/d production ceiling originally agreed in January 2012 when they meet next week in Vienna.

OIL STOCKS RISING

The IEA said its "call" on OPEC crude was unchanged for the fourth quarter and full-year 2013, at 29.6 million b/d and 30 million b/d, respectively. The call for the first quarter of 2014 was also unchanged at 28.6 million b/d, which is 1.4 million b/d below the group's output target.

On stocks, the IEA said OECD stocks rose counter-seasonally by 8.6 million barrels in September, reversing August's draw, to end the month at 2.67 billion barrels.

The build was in contrast to the 15.5 million-barrel five-year average draw for the month, the IEA said. Preliminary data points to a 7.6 million-barrels draw in total October oil inventories, weaker than the 16.0 million-barrel five-year average draw for the month, on the back of plunging refined product inventories.

The IEA also cut its forecast for Q4 global refinery crude by 555,000 b/d on "plummeting" European crude throughputs. Weak margins and seasonal plant maintenance slashed European crude runs in October taking runs to their lowest level since April 1989, the IEA said.

European crude runs sank to 11.3 million b/d in September, their lowest level since April 1991, the IEA said, noting the level was also some 1.1 million b/d below year-earlier levels.

Preliminary data for the US, Japan and Europe suggest OECD runs slumped by a further 1.3 million b/d in October, it said.

Global refining throughputs for Q4 are now projected at 76.7 million b/d, up 0.4 million b/d year on year.

--Robert Perkins, robert.perkins@platts.com
--Edited by Maurice Geller, maurice.geller@platts.com

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