IEA Forecasts Rise in OECD Crude Stocks

Forecasts for US shale oil growth and uncertainty around China’s crude imports may see oil stocks building again next year after OPEC and non-OPEC cuts contributed to substantial draws this year, the International Energy Agency said.

“Assuming OPEC production remains constant, we do not really see a big draw in OECD [Organization for Economic Cooperation and Development] crude inventories over the next six to nine months,” Olivier Lejeune, IEA oil storage market analyst, said on Friday, Reuters reported.

“Our balances imply a build for 2018,” Lejeune added, again assuming constant OPEC production.

A key reason for slowing stock draws next year is an expected increase in non-OPEC production, led by shale producers in the United States where the IEA expects production to rise by an enormous 1.1 million bpd, Lejeune said.

Adding to this is uncertainty around Chinese crude imports.

The lack of firm inventory data in China limits the ability to estimate its future demand but the scale of its imports this year implies a fairly large buildup in its commercial and strategic reserves that have to some extent offset inventory draws elsewhere.

“The big caveat to forecasts for OECD stock draws is that China is probably building,” Lejeune said.

"Assuming constant OPEC production, the agency, which coordinates energy policies of industrial nations, estimates an average 200,000 bpd draw this year, a lot of which has already taken place in the second quarter."

In its most recent monthly oil market report, the IEA said OECD commercial stocks were unchanged in July at 3.016 billion barrels, when they normally increase, but they remained 190 million barrels above their five-year average.

OPEC and non-OPEC members led by Russia decided in May to extend oil output cuts by nine months to March 2018 to tackle a global oil glut that halved oil prices over the previous three years, leading to a sharp drop in revenues.