IEA and OPEC Say: World Oil Market Now Well Supplied

Oil markets look “adequately supplied for now” after a big production increase in the last six months, but the industry is coming under strain, the West’s energy watchdog said on Friday.

The International Energy Agency said in its monthly report that the world’s spare oil production capacity was down to 2% of global demand, with further falls likely, Reuters reported.

“This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” the Paris-based organization said.

Members of the Organization of the Petroleum Exporting Countries and other exporters such as Russia agreed in June to raise output as the market appeared increasingly tight.

The price of global benchmark Brent crude has risen from around $45 a barrel in June 2017 and peaked at over $85 this month on bullish bets by speculators.

OPEC, Russia and others such as US shale companies had increased production sharply since May, raising global output by 1.4 million barrels per day.

Overall, OPEC had boosted production by 735,000 bpd since May as Middle East Gulf producers such as Saudi Arabia and the UAE more than compensated for declining output in Venezuela and Iran, which is facing US sanctions from next month.

OPEC also sees the oil market as well supplied and is wary of creating a glut next year, the group’s secretary-general said on Thursday, suggesting producers are in no rush to expand a June agreement that raises output.

“The market has been reacting to perceptions of a possible supply shortage. The market remains well supplied,” OPEC Secretary-General Mohammad Barkindo said.

Supply from Iran during September dropped to a two-and-a-half year low, the IEA said, as customers continued to cut back in the run-up to new sanctions, which start on November 4.

Iranian output fell to 3.45 million bpd, it said, down 180,000 bpd month-on-month. Iranian oil exports in September fell to 1.63 million bpd, down 800,000 bpd from recent 2Q18 peaks, the agency estimated.