The IEA's latest report makes for grim reading in terms of oil supply and demand over the first six months of 2019, despite positive predictions last year
As recently as last year experts had been predicting ten years of positive oil demand growth
The latest report from the International Energy Agency (IEA) shows oil supply over the first half of 2019 outstripped demand by 0.9 mb/d.
The autonomous organisation attributes the sluggish demand growth rate over the past six months to a diminishing European appetite, a slowdown in Indian LPG deliveries in April and May, and troubles in the global aviation sector.
Its data also highlights a global surplus in the first quarter of 2019 of 0.5 mb/d, in particular, contrasting previous expectations of a 0.5 mb/d deficit during the three-month period.
“This surplus adds to the huge stock builds seen in the second half of 2018 when oil production surged just as demand growth started to falter,” it said in a statement.
“Clearly, market tightness is not an issue for the time being and any re-balancing seems to have moved further into the future.
“In the meantime, the widely-anticipated decision by OPEC+ ministers to extend their output agreement to March 2020 provides guidance but it does not change the fundamental outlook of an oversupplied market.
“On our balances, assuming constant OPEC output at the current level of around 30 mb/d, by the end of the first quarter of 2020 stocks could increase by a net 136 mb.
“The call on OPEC crude in early 2020 could fall to only 28 mb/d.”
Oil supply and demand in 2019
The IEA says the picture of oil supply and demand will continue to evolve over the remainder of 2019, but as it stands concerns abound for any in the business of market management.
As recently as January last year, experts were predicted a decade’s worth of exponential growth in oil demand.
In an interview with Oil Industry News, chief economist of the Japan Oil, Gas and Metals National Corporation Takayuki Nogami said: “Global demand for crude oil is likely to grow for at least the next ten years.
“This is because economic growth in emerging economies including China and India will spur demand in sectors such as transportation and chemicals.
“Although some believe that the demand for oil will decrease due to the spread of electric vehicles, it will take a considerable amount of time to be fully implemented.
“One of the major challenges is the high costs of setting up necessary infrastructure such as charging stations.
“On the supply side, OPEC leader Saudi Arabia is attempting to diversify its economy by cultivating industries including logistics, telecommunications and manufacturing. However, Riyadh has not stated that it would reduce crude oil production.”
Despite the negative relationship with oil supply and demand over the past six months, however, the organisation predicts a rebound to 1.4 mb/d in demand growth next year.