IEA confirms non-OPEC producers take bigger share of global market

The International Energy Agency has confirmed that nations outside the Organization of Petroleum Exporting Countries have taken a larger share of the world oil market. IEA also said oil inventories rose to their highest level in years during October.

David Young
OGJ Online

LONDON, Dec. 12 --The International Energy Agency has confirmed that nations outside the Organization of Petroleum Exporting Countries have taken a larger share of the world oil market.

IEA, based in Paris, also said oil inventories rose to their highest level in 2 years during October.

The IEA reported that while stocks usually fall in the fourth quarter on increased heating oil use, they rose 220,000 b/d during October to 2.65 billion bbl in the 26 countries that are members of the Organization for Economic Cooperation and Development (OECD). The IEA said stocks are now 4.7% higher than a year ago and that the major economies probably will get through the coming winter without having to face oil price rises.

"Signs of optimism are beginning to emerge in the broader economy," the IEA said. "US oil demand, especially for jet fuel, may not be as weak as initially feared."

The IEA added, "In the absence of a severe winter, heating oil and kerosine prices are unlikely to come under significant pressure. Supplies are comfortable."

The IEA report says that non-OPEC oil producers will likely increase output by 920,000 b/d next year, 80,000 more than it forecast last month. It raised the outlook for this year's production increase by 100,000 to 690,000 b/d.

It said OPEC continues to exceed its own production quotas even as it calls for new output reductions from nonmember countries. The 10 OPEC members who participate in production agreements (Iraq does not), exported 500,000 b/d more than promised last month, the IEA report shows.

The immediate effect of the report was that oil prices on the London International Petroleum Exchange (IPE) fell for the sixth successive day. Brent crude oil for January settlement traded 21¢ lower at $17.70/bbl. London dealers trading electronically on the New York Mercantile Exchange before the official opening were buying cargoes for January delivery 18¢ lower than the previous market closing price of $17.90.

It has been a month since OPEC suggested that competitors trim output by 500,000 b/d before the cartel cuts output 1.5 million b/d in January. Without clear indications from OPEC about its next move, market prices have drifted down.

Orrin Middleton, an energy specialist at Barclays Capital in London said, "If OPEC fails to come up with anything by the end of the week, prices won't pause for breath until Brent hits $15/bbl. Even if OPEC comes up with something, prices are bound to fall back as people wait for compliance figures."

Russia, the biggest non-OPEC oil producer and exporter, has pledged to withhold 150,000 b/d and Mexico 100,000 b/d. OPEC is waiting for Norway to confirm cuts of 100,000-200,000 b/d.

Oman reduced production by 25,000 b/d and will wait 6 months before further adjustments. OPEC had expected a 40,000-b/d cut from the Persian Gulf state.

Contact David Young at davidy@ogjonline.com

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