Oil glut persists as others step up to replace slow in US flow: IEA

[PARIS] A glut in the global oil market has not evaporated with other countries stepping up output while US shale producers have cut back due to the sharp drop prices since last year, the IEA said Wednesday.

In its latest monthly report the International Energy Agency said that global oil supply remained flat at 95.7 million barrels per day (mbd) in April.

It said slowing US shale oil output was being offset by higher output from countries in the OPEC oil cartel as well as several non-Opec nations.

In fact, the IEA raised its forecast for non-Opec production growth this year. It sees output by countries outside of the cartel climbing by 830,000 bpd to 57.8 mbd.

"As the market continues to rebalance, pockets of supply growth are emerging from unsuspected corners," said the IEA, which noted that Russia and Brazil had coped unexpectedly well with the drop in oil prices from last year.

Oil prices plummeted by more than 60 per cent from peaks of over US$100 per barrel last June to under US$50 at the beginning of this year as Opec refused to cut production despite indications of a global supply glut.

The move by the 12-nation Opec cartel, which pumps about 30 per cent of global crude, was widely seen as aimed to push US shale oil producers, which have higher costs, out of the market.

The boom in US oil production has been one of the biggest developments in the oil market in years, but the IEA noted that the price fall appears to have brought that, at least temporarily, to a close as the number of rigs in use has dropped by 60 per cent and stocks actually decreased one week in April.

"While the price responsiveness of (US shale oil producers) was widely anticipated, the strong performance of some other sources of non-OPEC supply defied expectations," said the IEA.

"Russian oil companies seem to be coping exceptionally well with lower oil prices and international sanctions, thanks to a flexible tax regime that lightens their fiscal burden as prices drop and to steep cuts in production costs that came courtesy of the rouble's depreciation," it said, noting that Russian production jumped by a steep 185,000 barrels per day year-on-year in April.

It also noted a jump in Brazilian output by 17 per cent in the first quarter of the year as well as gains in China, Vietnam and Malaysia.

Meanwhile OPEC crude oil output continued to climb in April, the IEA said, increasing by 160,000 bpd from an upwardly revised jump of 960,000 bpd in March as Iraq and Iran boosted output and top exporter Saudi Arabia held output above 10 mbd for a second consecutive month.

That took OPEC's April supply to 31.21 mbd, the highest since September 2012, noted the IEA.

Moreover it noted that the a 14 per cent jump in the price for the main US oil contract, WTI, over the past month on indications that US shale oil output was falling was giving those producers "a new lease on life" and that several had boasted of big cuts in the production costs.

"It would thus be premature to suggest that OPEC has won the battle for market share," said the IEA. "The battle, rather, has just started." Barring any unforeseen disruption elsewhere, the IEA said that "the market's short-term fundamentals still look relatively loose." The IEA held steady at 1.1 mbd its forecast in global oil demand growth in 2015 to daily demand of 93.6 mbd.

AFP