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Oil markets adequately supplied, production soared over last 6 months: IEA

The energy watchdog, however, said that the oil industry is coming under strain as it copes with increasing global demand

Christopher Johnson | Reuters  |  London 

Representative Image
Representative Image

Oil look "adequately supplied for now" after a big increase in production over the last six months but the oil industry is coming under strain as it copes with increasing global demand, the West's watchdog said on Friday.

The Agency said in its monthly report that the world's spare oil production capacity was already down to only 2 per cent of global demand, with further reductions likely to come.

"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 said.

Members of the Organization of the Petroleum Exporting Countries and other exporters such as Russia and US shale producers had increased oil production sharply since May, the said, raising output by 1.4 million barrels per day (bpd).

Overall Opec had boosted production by 735,000 bpd since May as 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.

And the outlook for world oil consumption was faltering.

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The cut its forecast of global oil demand growth by 0.11 million bpd for both this year and next to 1.28 million bpd and 1.36 million bpd respectively.

"This is due to a weaker economic outlook, trade concerns, higher oil prices and a revision to Chinese data," said the IEA, which advises major oil consumers on policy.

commercial stocks rose by 15.7 million barrels in August to 2.854 billion barrels, their highest level since February, on strong refinery output and liquefied petroleum gas restocking, the IEA said.

It added that inventories were likely to have risen by 43 million barrels in the third quarter, the largest quarterly increase in stocks since the first quarter of 2016.

"The increase in net production from key suppliers since May of approximately 1.4 million bpd, led by Saudi Arabia, and the fact that oil stocks built by 0.5 million bpd in 2Q18 and look likely to have done the same in 3Q18, lends weight to the argument that the oil market is adequately supplied for now," the IEA said.

First Published: Fri, October 12 2018. 14:35 IST