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IEA August Report


The IEA published its August Oil Market Report with revisions for its global oil demand forecasts for 2012 and 2013: down 0.3mmb/d and 0.4mmb/d respectively to 89.6mmb/ and 90.5mmb/d. These were a result of baseline revisions as well as weaker economic growth assumptions.

Non-OPEC crude supply was flat MoM after a 0.2mmb/d rise in OECD production net off against a 0.1mmb/d fall in Non-OECD production and an equivalent drop in biofuels supply. With no change in the outlook for OPEC NGLs, that left the fall in demand to filter through as a reduction in the call on OPEC crude for 2012, which at 30.2mmb/d was down 0.3mmb/d.

At 31.4mmb/d OPEC production for July was down 0.1mmb/d MoM on a downwards revised June production figure. The IEA recorded Iranian production 0.1mmb/d lower MoM at 2.9mmb/d, while Angolan production was also down 0.1mmb/d MoM. On the other hand, Iraqi production was up 0.1mmb/d to reach 3.0mmb/d. Saudi production showed no signs of easing, remaining at 9.7mmb/d.

July OPEC production was more than 1mmb/d above the call on OPEC and, at current levels of production, we expect the market to remain oversupplied through 2H12.Until that over-supply stops, the price risk lies to the downside, in our view, and while consensus appears to believe that new sanctions pressure on Iran might close the gap, we are less convinced. At some point we expect that Saudi Arabia, at least, will have to cut from current levels of output if the market is to be balanced.

Colin Smith
VTB Capital analyst

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