Market fundamentals have eased since the start of 2012, and economic concerns have risen again with risks skewed to the downside, the International Energy Agency said in its latest monthly Oil Market Report.
The Paris-based agency estimates that crude oil output from the Organization of Petroleum Exporting Countries averaged 31.9 million b/d during May, up by 1.4 million b/d from its December 2011 output.
With oil prices down about $25/bbl from their March highs, some of the bullish market sentiment from the past 18 months has dissipated, as uncertainties surrounding the health of economies in the Eurozone and China have risen in prominence again, IEA said.
The market now may be characterized as better supplied rather than over-supplied, though, as the higher OPEC production sits against a backdrop of tight inventories at yearend 2011, historically high prices, and uncertainty over this summer’s supply from Iran and non-OPEC producers, according to the report.
IEA said OPEC production may trend slightly lower in this year’s third and fourth quarters if the European Union embargo and US sanctions crimp Iranian oil sales further. Preliminary April and May data on imports of Iranian crude are nearly 1 million b/d below late‐2011 levels.
The agency’s outlook for 2012 global oil demand growth is unchanged from its previous report at 800,000 b/d, although revisions to 2009-11 data now show this year’s demand averaging 89.9 million b/d vs. last month’s 90 million b/d.
Oil demand growth in China, the world’s fastest-growing market, has clearly slowed, the report said. Estimated April oil demand in China was down 0.6% from a year earlier, but demand growth is expected to resume in this year’s second half due to acceleration in industrial output and the belief that the Chinese government will enact measures to shore up the economy, IEA said.
With OPEC ministers scheduled to meet in Vienna on June 14, prices for benchmark Brent crude are still near $100/bbl, and OPEC supply is now nearly 2 million b/d over the group’s notional 30 million b/d output target agreed at its mid-December 2011 meeting.
IEA expects that the producer group, after reviewing the market outlook, will maintain the status quo.