The International Energy Agency's latest study of the world oil market shows no fundamental change in the supply/demand balance since the last meeting of its governing board at the end of September.
IEA board Chairman Ulrich Engelmann said there was no oil shortage for the time being, although the system was running at capacity.
But IEA sees a possible tightening of the products market with imbalances in some regions. The middle distillates market in the Far East remains tight, and the jet fuel market is tight worldwide.
Any further disruption in the market would first be felt in the products market. A severe shortfall in one market likely will squeeze products markets elsewhere. Responses must be tailored to this situation, said IEA Executive Director Helga Steeg.
IEA's outlook for supply/demand in the fourth quarter remains little changed from that reported at the end of the third quarter (OGJ, Oct. 8, p. 28)
Meantime, the European Community's Council of Energy Ministers has agreed to allow civil servants to examine proposals for the EC to convert its IEA observer status into full membership. However, Germany, Britain, the Netherlands, and Denmark have strong reservations about the idea, contending it would be useless, even harmful, to make any change in the middle of a crisis.
SUPPLY, DEMAND
Latest IEA statistics show production by members of the Organization of Petroleum Exporting Countries is 22.6 million b/d, only 400,000 b/d short of output levels before Iraq's Aug. 2 invasion of Kuwait, which led to the embargo on all exports from Iraq and Kuwait.
Total production from the world outside the former Soviet bloc is 53.4 million b/d, only 300,000 b/d down from the level at the end of July. This level is likely to be maintained throughout the fourth quarter, IEA said.
IEA estimates that by yearend OPEC available capacity, excluding Iraq and Kuwait, will be 23.3 million b/d.
This higher level of OPEC production combined with new estimates of lower demand has produced a slightly more comfortable supply/demand balance projected for the fourth quarter.
IEA expects fourth quarter oil demand to drop by 300,000 b/d from a year ago to 54.1 million b/d. The 700,000 b/d difference is expected to be made up from commercial stocks held in Organization for Economic Cooperation and Development countries, a stock draw considered normal for the time of year.
IEA's latest estimates of consumption outside the former Soviet bloc in the first 9 months of 1991 are down slightly from levels for the first 3 quarters of 1990. The first quarter 1991 projection is 53.6 million b/d vs. 53.7 million b/d in first quarter 1990. In the second quarter, consumption could be down to 50.6 million b/d compared with 51.3 million b/d in the same 1990 period. The biggest decline could come in the third quarter, when IEA estimates consumption at 51.9 million b/d vs. 53 million b/d in 1990's third quarter.
WARNING AGAINST COMPLACENCY
IEA again warned OECD governments not to become complacent with the apparent easing of supply/demand concerns and to continue to be prepared to respond to a significant supply disruption.
Peter Huggins, head of the IEA's emergency planning, said the organization was generally strong and balanced on emergency preparedness, although some countries need strengthening.
IEA government stocks have built to about 140 million metric tons, enough to draw down 3 million b/d for a full year (Table).
In addition, industry stocks in IEA countries exceed 300 million tons and include a large proportion of product stocks at sites widely dispersed in member countries.
Together, industry and government stocks over the 90 day compulsory level and minimum operating requirements could be drawn down at 3.5 million b/d for a year. Engelmann said emergency measures would take at most 3 weeks to implement.
IEA also is operating an emergency data system worked out with oil companies since August. In an emergency, this system would be used to assess the oil supply situation in each member country.
Problems in an emergency would be solved by IEA working with the oil companies.
Steeg said the board discussed the United Nations invitation for the agency to meet with OPEC officials in Geneva Nov. 6. IEA was willing to meet with "producing countries" either individually or in a group.
There can be no dialogue between IEA and OPEC in the context of the present crisis, she said, adding that it was less a question of principle than of practicalities.
It would be unwise to raise expectations that would be dashed if such a meeting took place without careful preparation to eliminate topics such as production levels or price fixing, where no agreement was possible, she said.
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