Published: Sun, March 17, 2019
Finance | By Loren Pratt

IEA sees modest oil market deficit in Q2

IEA sees modest oil market deficit in Q2

Oil's poised for the best weekly rally in a month as the world's top crude producers are scheduled to discuss extending their pledged output curbs to avert a global glut.

In its Oil Market Report released on March 15, the IEA (International Energy Agency) estimated that the oil market will fall into a deficit of 0.5 MMbpd (million barrels per day) in Q2 2019, which could help USA crude oil prices to easily move above the psychologically important level of $60. A meeting between President Donald Trump and President Xi Jinping to sign an agreement to end their trade war won't occur this month and is more likely to happen in April at the earliest, three people familiar with the matter said. This led to the US taking a number of steps in the 1980s to take away OPEC's monopoly in determining oil prices, and the USA has strengthened global commodity markets with Chicago and NY.

Along with this, the cuts in pumping implemented by the Organization of Petroleum Exporting Countries (OPEC) and some large producers outside that group, as well as the increase in the crude extraction in the United States, influenced the prices of the so-called black gold.

The association also warned in its report that, despite efforts to balance the market, the crude supply could grow stronger than demand during 2019.

A falling USA dollar could help the situation as well, and as the Saudi cuts continue to grip the market, I think overall we have a constructive outlook for crude oil as not only do all those things coming together, but we also have Chinese stimulus that will push demand on the mainland as well.

The instability in Venezuela and the growing evidence of a slowdown in United States shale have pushed prices up. This translates to a serious weakening of both Russian Federation and Saudi Arabia's hands in terms of dominating both production and global oil prices. We will observe the economic-political consequences of the USA cornering Saudi Arabia, Iran and Venezuela in the global oil game.

The agency also said rising U.S. output was providing comfort to world markets.

IEA President Fatih Birol, whose remarks were included in the report, said that there might be extraordinary changes in the global oil industry in the future and that the US would continue to influence the global oil market over this five-year period.

With production in Canada also increasing, and most of its exports moving to USA refineries, more United States crude should be available for export.

"Much of this spare capacity is composed of crude oil similar in quality to Venezuela's exports", said the agency. With increasing competition, the global demand for OPEC production will not return to pre-2016 levels during the period in question.

After oil prices had a rollercoaster ride at the end of past year, OPEC+ agreed to cut production by 1.2 mbd in January to June. The IEA report indicates that USA energy growth will continue to meet 70 percent of the increase in global production capacity by 2024.

It was also reported that Saudi Arabia exceeded its reduction commitments to 170 per cent.

In a Financial Times news article, according to market research firm Rystad Energy's predictions, we will experience a 2019 where very shocking changes that would not have come to mind will take place in the global energy market.

In 2018, petroleum trade volume, which stands for imports minus exports, reached 2.3 million barrels per day, which was its lowest level since 1967, said EIA. Involuntary production declines from the coalition's members including Venezuela and Iran have further squeezed supplies.

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