Published: Wed, September 13, 2017
Business | By Max Garcia

IEA: Oil markets managed, but beware of the weather

IEA: Oil markets managed, but beware of the weather

Non-OPEC countries have fulfilled agreement on output cut by 118% thanks to Azerbaijan and Kazakhstan, International Energy Agency (IEA) said in its report for September.

"Depending on the pace of recovery for the US refining industry post-Harvey, very soon OECD product stocks could fall to, or even below, the five-year level", it said referring to Hurricane Harvey which hit the United States two weeks ago.

US crude imports fell last week by 95,000 barrels per day to 7.1 million bpd.

Meanwhile, supply-side strains over the last few years have left oil prices at about half what they were three years ago and traders have been watching the level of crude oil stocks held by members of the Organization for Economic Cooperation and Development, which remain above the five-year average and seasonal trends, for signs of market recovery.

"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly", the IEA said in the monthly report.

But with oil demand perking up as well as hurricanes and regular summer maintenance knocking out some production, the IEA said it has seen some of that glut disappear. But if inventories drop below the five-year average soon, those output cuts may not be prolonged. Demand rose by 2.3 million barrels a day in the second quarter of this year.

The agreement on reducing oil production, which OPEC has concluded with 11 independent producing countries, including Russian Federation, is in effect until the end of March 2018. Compliance levels in August hit 82 per cent compared with 75 per cent.

Crude oil prices fell in Asia on Tuesday with industry estimates of US inventories expected to show a leap as stocks build from Gulf Coast refinery shutdowns in the wake of Hurricane Harvey.

The oil market has coped relatively well with the challenges posed by the hurricane season thus far, but that said, now may be a good time to consider steps to mitigate the impact of future severe-weather events.

The agency, which coordinates energy policies of industrial nations, raised its 2017 global oil demand growth estimate to 1.6 million barrels per day (bpd) from 1.5 million bpd.

Early Wednesday morning, West Texas Intermediate crude for October delivery traded at $48.71 a barrel, up about 1% compared with Tuesday's closing price of $48.23.

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