Global oil demand is expected to surge this year as the global economy improves steadily. But whether the global crude demand will be enough to prop up sluggish oil prices remains unclear, the International Energy Agency said Wednesday.
Global oil demand is rising faster than projected, but so is supply, and the IEA, which advises industrialised countries on energy policy, rolled back its prediction of when the market would tighten.
The agency raised its forecast for the world’s oil demand growth in 2015 by 90,000 b/d, pointing to an improving global economic landscape, but warned of continued uncertainty over how the market is responding to the lower price environment.
The call on OPEC crude was revised marginally higher for the second half of 2015 — by 100,000 b/d — to 30.35 million b/d, however IEA left the call unchanged for 2015 as a whole compared with last month’s report at 29.5 million b/d.
“Recent developments thus may call into question past expectations that supply and demand responses would tighten the market from mid-year on,” the IEA said in its monthly report.In its latest monthly oil market report, the IEA said that while there were signs demand was picking up, supply in March also rose by more than 1 million b/d compared with February as OPEC output soared to more than 31 million b/d.
The IEA now sees global oil demand this year rising by 1.1 million b/d to average 93.6 million b/d.
The upward revision was in part driven by cold temperatures globally in the first quarter of the year and stronger than expected demand in India and Russia, the IEA said.
Oil prices have halved from above $115 a barrel last June due to ample supply, in a decline that deepened after the Organization of the Petroleum Exporting Countries (OPEC) chose to defend market share rather than cut output.
OPEC’s production surged to 31.02 million b/d in March, almost a two-year high, led by Saudi Arabia. Saudi Arabia boosted crude production to the highest in three decades in March, with a surge equal to half the daily output of the Bakken formation in North Dakota.
The kingdom boosted daily crude output by 658,800 barrels in March to an average of 10.294 million, according to data the country communicated to the Organization of Petroleum Exporting Countries’ secretariat in Vienna. The Bakken formation, among the fastest-growing shale oil regions in the U.S., pumped 1.1 million b/d in February, according to data from the North Dakota Industrial Commission.
Oil prices have rallied about 16 percent in New York this month on stronger fuel demand and as a record decline in U.S. rigs fanned speculation that the nation’s production will slow from its highest pace in three decades.
“It confirms the new strategy of the Saudis,” Giovanni Staunovo, an analyst at UBS AG in Zurich, said by e-mail to Bloomberg. “If OPEC isn’t balancing the market any more, why should the Saudis hold so much spare capacity when they can use it to make money? Production is still likely to increase in the near term as domestic demand will increase.”
In the space of 31 days, Saudi Arabia managed a production boost that took drillers in North Dakota’s Bakken almost 3 years to achieve, according to data compiled by Bloomberg. Output from the Bakken shale increased by about 668,000 b/d from February 2012 to December 2014, according to data from the state’s industrial commission.
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