World oil demand will grow
more than expected this year, helping to ease a global glut despite rising
production from North America and weak OPEC compliance with output cuts, the
International Energy Agency said on Friday.
The agency
raised its 2017 demand growth forecast to 1.5 million barrels per day (bpd)
from 1.4 million bpd in its previous monthly report and said it expected demand
to expand by a further 1.4 million bpd next year.
"Producers
should find encouragement from demand, which is growing year-on-year more
strongly than first thought," said the Paris-based IEA, which advises
industrialized nations on energy policy.
"There
would be more confidence that rebalancing is here to stay if some producers
party to the output agreements were not, just as they are gaining the upper
hand, showing signs of weakening their resolve," the IEA said.
The
Organization of the Petroleum Exporting Countries is curbing output by about
1.2 million bpd, while Russia and other non-OPEC producers are cutting a
further 600,000 bpd until March 2018 to help support oil prices.
The IEA
said OPEC's compliance with the cuts in July had fallen to 75 percent, the
lowest since the cuts began in January.
It cited
weak compliance by Algeria, Iraq and the United Arab Emirates.
In
addition, OPEC member Libya, which is currently exempt from the output cuts,
steeply increased output.
As a
result, the overall global oil supply rose by 520,000 bpd in July to stand
500,000 bpd above year-ago levels.
Adding to
the challenges of oil producers to support oil prices is rising non-OPEC
output, which is expected to expand by 0.7 million bpd in 2017 and by 1.4
million bpd in 2018 on strong gains in the United States, which is not
participating in the output caps.
Still, strong
global demand growth is helping to clear excess barrels with the IEA
registering a decline in stocks in industrialized nations in both June and
July.
Stocks
remain 219 million barrels above a 5-year average - a level that OPEC is
targeting with its output cuts.
The IEA
also revised historic demand data for 2015-2016 for developing countries,
cutting it by 0.2-0.4 million bpd.
As a result
of those historic revisions, the IEA cut baseline demand figures for 2017-2018
by around 0.3-0.4 million bpd and hence lowered demand for OPEC crude by the
same amount.
"The
impact of carrying this lower demand base into 2017 against unchanged supply
numbers is that stock draws later in the year are likely to be lower than first
thought," the IEA said.
Changes mainly happened as
the IEA revised down historic demand data for Indonesia, Malaysia and Iran
while revising up India and keeping China largely unchanged.
(Reuters, August 11,
2017
)