November 14, 2018: The International Energy Agency Wednesday welcomed a recent increase in global oil stocks as insurance against possible problems on the supply side.
In its latest monthly oil market report, the Paris-based IEA confirmed its demand growth estimates of 1.3 million barrels per day (mbd) for this year and 1.4 mbd in 2019.
The oil market has turned very volatile in recent months, with US President Donald Trump pressing OPEC — and especially cartel kingpin Saudi Arabia — to increase output so as to offset reduced supply from Iran following the reintroduction of tough US sanctions.
Riyadh however has been trying to curb OPEC production in order to bolster prices, calling earlier this week for an output reduction of 1.0 mbd.
The IEA said recent sharp oil price falls to below $70 per barrel for Brent crude, compared with $86 last month, meant the market “appears to be more relaxed than it was a few weeks ago.”
But “such is the volatility of events that rising stocks should be welcomed as a form of insurance, rather than a threat,” it added.
“The United States remains committed to reducing Iranian oil exports to zero… (and) there are concerns as to the stability of production in Libya, Nigeria and Venezuela,” it said.
At the same time, the IEA said lower prices were positive given the headwinds facing the global economy although if they fall too far, producers would inevitably look to cut output.
In a similar report Tuesday, OPEC warned that “although the oil market has reached a balance now, the forecasts for 2019 for non-OPEC supply growth indicate higher volumes outpacing the expansion in world oil demand, leading to widening excess supply in the market.”