In its latest Oil Market Report, the IEA has increased its 2012 global growth forecast 0.1mmb/d to 90.0mmb/d; YoY demand growth is unchanged at 0.8mmb/d. The non-OPEC supply growth forecast has been reduced 0.1mmb/d, but non-OPEC supply is still expected to grow 0.6mmb/d to 53.3mmb/d. The amendments to demand and non-OPEC supply forecasts feed directly through to a 0.2mmb/d increase in the call on OPEC crude to 30.3mmb/d.
In line with other secondary sources, the IEA estimates that OPEC crude production increased 0.4mmb/d MoM. That was the fourth MoM increase in a row and took production to 31.9mmb/d, outpacing the growth in the call on OPEC crude. Current production stands 1.6mmb/d above the call on OPEC crude for 2012.
OECD oil inventory rose 13.5mmbbl in March, in contrast to the typical 10.2mmbl draw. That took inventory to 2,649mmbbl, above the five-year average for the first time since May 2011. Days forward cover (DFC) increased to 60.3 days, 3.0 days above the five-year average.
In our view, this data set confirms our expectations that global oil markets were transitioning from an under to an over-supplied position that would drive up inventory and in turn pressure oil prices. If current OPEC production levels are maintained, we calculate that OECD DFC will exceed 62 days by YE, the highest since 1995. We continue to believe that market concerns around Iran will prove exaggerated, but that obviously remains a moot point. However, we expect that near term OPEC production is likely to increase further and, if maintained around current levels, we expect the Brent price to fall further than the 10% decline experienced since the beginning of April.