There were minor changes in the IEA’s forecasts in its September Oil Market Report, the most notable of which was a 0.2mmb/d cut in the call on OPEC crude for 2014. The report confirms a MoM reduction in OPEC output following the collapse in Libyan production. However, it also notes that Saudi Arabian production has risen to near-record levels. While oil markets are experiencing a tight 3Q13, that is set to ease as global oil supply is expected to rise sharply in 4Q13. Indeed, at current OPEC production levels held flat, oil markets might be significantly over-supplied in 1H14, on both the raw and the adjusted data.
Global demand was adjusted upwards from last month’s report, by 70kmb/d for 2012 through to 2014. The IEA expects global demand to grow 895kb/d YoY in 2013 and a further 1.1mmb/d in 2014. Global demand is set at 90.9mmb/d in 2013 and 92.0mmb/d in 2014.
A rise in non-OPEC supply in 2014 results in a 0.2mmb/d cut in the call on OPEC crude to 29.2mmb/d, on an unadjusted basis, or to 29.8mmb/d on an adjusted basis. For 2013, the call on OPEC crude remained unchanged at 29.9mmb/d on an unadjusted basis or 30.5mmb/d on an adjusted basis.
OPEC crude production was put at 30.51mmb/d in August, a 260kb/d drop MoM on upwards revised July production, as a drop in Libyan production more than offset increased volumes from Saudi Arabia and Iraq. Libyan volumes averaged just 550kb/d in August, down 450kb/d MoM, with early September readings as low as 150kb/d. Saudi production rose to 10.2mmb/d, the highest level in 32 years, and Iraqi production picked up 0.1mmb/d MoM.
OECD oil inventory levels increased just 8.0mmbbl in July, less than half the seasonal increase for that month. That left OECD oil inventory levels at the bottom of the seasonal range, though in terms of days forward cover, inventory levels are around the seasonal average. The IEA comments that OECD stock levels might be on the verge of a rebound.
There is a notable discrepancy between the IEA’s adjusted and unadjusted call on OPEC crude, with one resulting in a market under-supply and the other an over-supply in 3Q13, assuming OPEC production levels are maintained at current levels. In either case, oil markets appear set to ease from 4Q13 and to be significantly over-supplied in 1H14, leading us to believe that pressure on the oil price is more likely to be negative than positive.