IEA ups oil demand forecast for 2017, says next few weeks are ‘crucial’ for markets after OPEC deal
CNBC
The next few weeks will give investors an
insight into whether the production cuts by OPEC and non-OPEC will be
fully implemented and will be a crucial period for prices of the
commodity, according to a new monthly report by the IEA (International
Energy Agency).
"For contractual and
logistical reasons, we might initially see that the output cuts do not
fall neatly into place," the Paris-based organization said in the report
Tuesday.
"The deal is for six
months and we should allow time for it to be implemented before
re-assessing our market outlook. Success means the reinforcement of
prices and revenue stability for producers after two difficult years;
failure risks starting a fourth year of stock builds and a possible
return to lower prices," the IEA added.
After several meetings this year, OPEC
countries decided to cut production by 1.2 million barrels a day
starting in January. Non-OPEC members, such as Russia, joined the
efforts earlier this month sending oil prices higher.
According to Neil Atkinson, head of the oil industry and markets
division at the IEA, it was in the "mutual interest" of OPEC and
non-OPEC members to reach such an agreement.
"We know the financial
situation of many of the producers is fairly challenging whether they
are OPEC and non-OPEC," Atkinson told CNBC on Tuesday.
"The main dynamic which is
facing all of the producers, whether they are OPEC or non-OPEC, was that
had the current market situation remained in place we would have gone
into 2017 and probably through most of 2017 with the oil market still in
considerably surplus supply over demand, and that would be the fourth
year in a row where that situation prevailed," Atkinson said.
The agency added in the report
that as OPEC was deciding to cut production last month, its crude
output in November was 34.2 million barrels per day (mb/d) - a record
high - and 300,000 barrels a day higher than in October.
The IEA also upped its
forecast for global oil demand for this year and next year due to
revised estimates for Russian and Chinese demand. It saw growth of 1.4
mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth
in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day
from its previous estimate.
