* Refining slowdown to support stock draw
* Uptick to non-OPEC output from Brazil, others
The International Energy Agency said Thursday it foresaw a
"sustained tightening" in crude markets and a reduction in global
product stocks, despite recent price weakness.
In its monthly oil market report, the agency attributed current
price weakness to low refinery throughputs in the second quarter and
anticipated refinery maintenance coming up in the fourth quarter,
and also noted an uptick in non-OPEC output. Its demand growth
estimate for this year remained unchanged at 1.4 million b/d.
The overall outlook for the second half of this year is for a
broadly balanced oil market, it said.
In the second quarter, "refinery throughput declined 500,000 b/d
year on year, the first annual drop of this scale since the Great
Recession of 2008-09. Even in China, the world's second largest oil
consumer, rapidly expanding independent refinery runs forced oil
majors Sinopec and Petrochina to cut throughput."
"We expect more subdued growth in refining activity, with runs
lagging total oil demand growth for all but the first quarter this
year -- hardly good news for the crude oil market in the short
term," the report said.
"But there is no gain without some pain. The resulting product stock
draw will increase refiners' appetite for crude oil and help pave
the way to a sustained tightening of the crude oil balance."
The IEA trimmed its estimate of global oil demand growth for next
year from 1.29 million b/d to 1.25 million b/d due to a weaker
macroeconomic outlook, influenced by the UK's vote to leave the EU,
economic shifts in China, weaker prospects for resource-exporting
countries and the general waning of the support provided by lower
oil prices.
While leaving in place its annual demand growth projection for this
year, it also confirmed a slowdown so far, from 1.6 million b/d year
on year in the first quarter, to 1.4 million b/d in the second
quarter and 1.2 million b/d in the current quarter, before an
anticipated spurt in the fourth quarter.
Among the factors influencing demand, it noted that recent vehicle
sales data in China had been robust, helping offset the country's
overall slowdown.
It also noted that India's surge in oil demand had stalled in the
middle of this year due to weather-related factors and softer
petrochemical demand. Surging bunker fuel demand in Singapore has
provided an offset to demand weakness, it added.
BUOYANT OUTPUT
On the supply side, the IEA estimated OPEC output had reached an
eight-year high of 33.39 million b/d in July, while also raising its
estimate of non-OPEC supply growth in 2017 to 320,000 b/d, from
230,000 b/d, mainly due to greater optimism about the expected
startup of Kazakhstan's Kashagan field.
Along with predominantly robust OPEC output -- despite problems in
individual member countries -- it noted a 550,000 b/d monthly
increase in non-OPEC output in July, amid strong production ranging
from Canada to the North Sea to Russia. However it kept in place its
estimate that year-on-year, non-OPEC output will fall by 900,000 b/d
in 2016.
The IEA highlighted Brazil's return to output growth, with liquids
output reaching an all-time high of 2.56 million b/d in July,
despite the country's economic and political crisis.
The purchase by Norway's Statoil of the Carcara subsalt discovery
seems to herald potential reforms that would reduce the dominance of
state-owned Petrobras and increase space for other investors, the
IEA said.
The IEA gave a downbeat assessment of the prospects for US shale,
saying that while drilling activity had shown signs of recovery, "a
substantial boost in activity may require oil prices nearer to
$60/b." Latest corporate updates suggested the likes of
ConocoPhillips, Hess and Anadarko "remain cautious about spending
and drilling plans," it said.
--Nick Coleman,
nick.coleman@spglobal.com
--Edited by Maurice Geller,
maurice.geller@spglobal.com
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