Washington - Global oil inventories rose for the first time in six months in January, despite Opec’s production cuts, but if the group maintains its output limits, the market may tilt into deficit in the first half of 2017, the International Energy Agency (IEA) said on Wednesday.
The IEA said that crude stocks in the world’s richest nations had risen in January for the first time since July by 48 million barrels to 3.03 billion barrels.
“The actual build in Organisation for Economic Co-operation and Development stocks in January reminds us that it may be some time before global stocks start to fall,” the agency said.
Compliance by Opec with its agreed output cut of 1.2 million barrels per day (bpd) in the first half of this year was 91 percent in February and, if the group maintains its supply limit to June, the market could show an implied deficit of 500 000bpd, the IEA said.
“If current production levels were maintained to June 2017 when the output deal expires, there is an implied market deficit of 500 000bpd for 1H17, assuming, of course, nothing changes elsewhere in supply and demand,” the IEA said.
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“For those looking for a re-balancing of the oil market the message is that they should be patient, and hold their nerve.”
Within Opec, Saudi Arabia has shouldered the burden of the production cuts, offsetting poorer compliance by other nations.
In February, Saudi oil production staged a monthly rise of 180 000bpd, but at 9.98 million bpd, its output remained below its agreed target of 10.06 million bpd and, according to tanker-tracking data, Riyadh is focusing its cutbacks on North America, the IEA said.
“At 32.3 million bpd, the call on Opec crude during the first quarter of 2017 is higher than average output of 31.9 million bpd so far this year, which could lead to a draw in global inventories,” the IEA said, adding that it was not clear if the group will extend its supply agreement.
“Beyond the nervousness about this legacy supply and concerns about rising production today from some non-Opec countries, the implementation of the Opec production agreement appears in February to have maintained the solid start seen in January.”
Beyond Opec, oil production rose 90 000bpd in February, as increasing US output offset declines elsewhere.
Compared with last year, total non-Opec supply was 285 000bpd lower, of which the US accounts for roughly half, the agency said.
“The recovery path of US tight oil is key to rebalancing the oil market over 2017, so is the compliance of the 11 non-Opec countries that agreed to curb output,” the IEA said.
The IEA left its estimate of global demand growth unchanged from its last report at 1.4 million bpd in 2017.