The International Energy Agency (IEA) recently issued its Oil Market Report (OMR) focused on the global oil market including detailed statistics and commentary on oil supply, demand, inventories, prices and refining activity.
According to the report, global supply fell 0.6 mb/d to 91.1 mb/d in September, down 8.7 mb/d on 2019, as the UAE slashed output and maintenance cut flows in the North Sea and Brazil, more than offsetting a US rebound from August’s hurricane shut-ins.
In 4Q20, world supply may rise towards 92 mb/d from 91.3 mb/d in 3Q20 if Libyan output continues to recover and assuming OPEC+ produces to its target. Total non-OPEC supply is set to drop by 2.6 mb/d in 2020 before recovering by 0.4 mb/d in 2021.
What is more, global oil demand rose 3.4 mb/d month-on-month (m-o-m) in July, as coronavirus restrictions eased and summer holidays in the northern hemisphere supported a rise in transport fuel demand.
However, a second wave of Covid-19 cases and new movement restrictions are now slowing demand growth.
Our 2020 forecast is unchanged at 91.7 mb/d, down 8.4 mb/d from 2019. Our 2021 forecast is also largely unchanged at 97.2 mb/d, showing a gain of 5.5 mb/d from 2020.
…the report stated.
As for the crude futures, fell in September versus August, partly reflecting weaker financial markets. Specifically, ICE Brent fell by-$3.15/bbl and NYMEX WTI by -$2.76/bbl m-o-m to $41.87/bbl and $39.63/bbl, respectively.
Prices saw a 10% early-October jump ahead of Hurricane Delta. Physical prices e.g. North Sea Dated, remained below the futures front month reflecting a well-supplied prompt market.
Freight rates remain at historically weak levels as tanker activity sits at a near 10% deficit to 2019 levels.
Our global demand and supply estimates (including an assumption of full compliance with the OPEC+ agreement) imply a significant stock draw of 4 mb/d in the fourth quarter. While this is a large change, it is happening from record high levels. With the 1.9 mb/d increase in the OPEC+ production ceiling currently planned for 1 January, there is only limited headroom for the market to absorb extra supply in the next few months.