In its April Oil Market Report (OMR), the IEA has global oil demand in 2013 growing 795kb/d (0.9%) YoY to 90.6mmb/d, a slight reduction to the previous OMR’s 820kb/d YoY growth estimate but leaving the 2013 demand estimate unchanged.
The IEA notes several ‘bright spots’ for non-OPEC supply in 2013; namely the reported restart of South Sudan production and the restarts of Elgin/Franklin in the North Sea, Peng Lai in China and Frade in Brazil. The IEA forecasts non-OPEC supply to grow by over 1mmb/d in 2Q13 and 3Q13. Even so, downside risks remain and non-OPEC supply in 2013 has been adjusted downwards by 20kb/d to 54.4mmb/d (previously 54.5mmb/d).
OPEC production in March slipped to 30.44mmb/d, down 0.14mmb/d MoM on upwards revised February production (was 30.49mmb/d; now 30.58mmb/d). However, Saudi production was up 50kb/d MoM to 9.3mmb/d and is expected to pick up further in order to meet increased demand as the refinery turnaround season ends. Iraqi production is also likely to pick up on the resumption of operations at the Majnoon oilfield in the beginning of May, with a 100kb/d initial production target.
A 32.9mmbbl draw in OECD oil inventory in February was in line with the historical average, meaning inventory levels remained above the seasonal average, at 2,664mmbbl. January’s stock build was revised upwards. However, preliminary data for March suggests that oil inventory declined 9.7mmbbl, nearly three times the seasonal average. Chinese commercial inventory levels are seen to have risen in February.
With the call on OPEC crude for 2013 unchanged at 29.7mmb/d and assuming March OPEC crude output is maintained prospectively, that leaves the market over-supplied to the tune of 0.7mmb/d (0.8mmb/d per previous OMR).
Brent is over USD 10/bbl down on its February peak and the IEA sees this to be in line with supply growth exceeding growth in demand, more comfortable OECD inventories and a gloomier outlook on global economics. In our view, OPEC production might well increase prospectively into the seasonally weaker second quarter demand and we would expect that to be a source of pressure on oil prices.