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IEA: Global Oil Markets have Begun to Tighten
International Energy Network News: The International Energy Agency (IEA) said on Friday that the global oil market has begun to tighten. The IEA said stronger-than-expected Chinese demand and Saudi Arabia's production cuts were supporting oil prices.The IEA said: "Suddenly, market conditions are tighter than we thought." But it still cautiously pointed out that it is too early to declare that the oil market will return to the bull market of the past.
The IEA raised its oil demand growth forecast for 2012 and 2013, citing increased demand from China, the United States and Brazil.
The IEA currently expects oil demand to grow by 975,000 barrels per day in 2012, compared with the previous forecast of 850,000 barrels per day.
The IEA currently expects oil demand to grow by 930,000 barrels per day in 2013, compared with the previous forecast of 865,000 barrels per day.
The IEA mentioned the acceleration of China's oil consumption in December last year, saying that the speed was surprising. The IEA added: "China's economic indicators are mixed, but recent positive data point to a potential rebound in demand."
However, while oil demand is growing, non-OPEC countries (OPEC) have not provided additional supply accordingly, which has led the IEA to slightly increase its oil demand forecast for OPEC.
Over the past two months, OPEC's oil production has fallen sharply due to Saudi Arabia's production cuts. The IEA attributes the production cuts to seasonal factors, such as the end of summer in Saudi Arabia, which reduces domestic oil consumption.
The IEA said: "Saudi Arabia's production cuts are more driven by weather than price considerations. The reduction in production in recent months also reflects a seasonal pullback in refinery demand for the country's oil."
The IEA estimates that Saudi Arabia's oil production in December was 9.4 million barrels per day, down sharply from a 30-year high of more than 10 million barrels earlier in 2012. OPEC's oil production in December was 30.6 million barrels per day, the lowest level in a year. In addition to Saudi Arabia's production cuts, Iraq, Kuwait and the United Arab Emirates also reduced supply.
But OPEC’s oil production in 2012 was still the highest in history. The IEA assesses that OPEC's oil revenue is expected to exceed $1 trillion last year, a historical peak, due to increased production and record high Brent crude oil prices.
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