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IEA sees Opec supply jumping most in four years on Saudi surge
[LONDON] Opec production climbed by the most in almost four years as Saudi Arabia, Iraq and Libya boosted output amid a stronger outlook for global oil demand, according to the International Energy Agency.
The Organization of Petroleum Exporting Countries raised output by 890,000 barrels a day to 31.02 million a day in March, the biggest monthly gain since June 2011, the IEA estimated. Preliminary data suggest output may rise further this month, it said. The agency cut its prediction for US and Canadian oil supply growth in the second half of the year.
Oil prices are 45 per cent lower than a year ago, trading at US$59 a barrel in London today, as Opec maintains a policy of defending market share in response to booming US shale output. While members including Iran and Libya are urging the organization to support prices by curbing output, Saudi Arabia is insisting Opec should only pare supply if producers outside the group share the burden.
"Opec's core Gulf producers - led by Saudi Arabia - appear to be sticking with their defense of market share," the Paris-based adviser to 29 nations said in its monthly market report.
While "unexpected pockets of demand strength" have emerged, it's too early to say whether they will last, the IEA said. Global oil demand will increase by 1.1 million barrels a day this year to an average 93.6 million a day. That's 90,000 barrels a day more than projected in last month's report, reflecting both global economic recovery and especially cold winter temperatures in the first quarter.
"Stronger-than-expected demand in the first quarter might signal a faster recovery" or "might just as likely point to a slower one if pockets of demand strength prove short-lived and lead to weaker deliveries later on," the IEA said.
The agency trimmed estimates for North American production in the second half of the year by 160,000 barrels a day because of a weaker outlook for the US and Canada. Drillers in the US have cut the number of rigs in service to the lowest since 2010, according to Baker Hughes Inc. The IEA left projections for total non-Opec supply in 2015 unchanged at 57.4 million barrels a day.
Global supply increased by 3.5 million barrels a day in March from a year ago as gains in the US, and some in Russia, added to the output surge from Opec, according to the agency.
While the IEA increased global oil demand forecasts slightly for 2015, it said the market's response to lower prices "may still be in its early stage."
The jump in Opec's output in March leaves the organization's production about 2.5 million barrels a day higher than the average of 28.5 million a day needed in the second quarter, according the report. The group will next meet to review output targets on June 5 in Vienna.
Saudi Arabia, Opec's biggest member, led the increases with growth of 390,000 barrels a day to 10.1 million a day in March, the highest since September 2013 and close to record levels, the IEA said. The country's exports rose by 600,000 barrels a day to 7.4 million a day, with most of the increase headed to customers in Asia, according to the IEA.
Iraq restored output by 350,000 barrels a day to 3.67 million a day in March as improved weather in the Persian Gulf enabled the country to export a record 3 million barrels a day.
Libya revived production by 190,000 barrels a day to 480,000 a day even as conflict intensified between the country's internationally recognized government in the east and a rival Islamist administration in Tripoli, the capital.
Iran's crude exports rose to 1.27 million barrels a day in March, the highest in a year, amid rising purchases by China, according to the report. One of the biggest uncertainties for the market is whether the country will secure a deal with world powers that lifts sanctions on its oil exports, following a preliminary accord on April 2, the agency said.