IEA Sees Oil Market Rebalancing in Months as Demand Rises

[Wiljor]

Market Rebalancing in Months as Demand Rises

The oil market will rebalance in the next several months as a price collapse boosts consumption and curbs supplies, the International Energy Agency said, a day after Saudi Arabia’s oil minister told reporters demand is rising.

An oil price as low as $45 a barrel is unsustainable, Fatih Birol, the chief economist for the Paris-based adviser to 29 nations, said at a conference in London Thursday. Investment cuts in the U.S., Russia and Brazil will curtail output growth, bringing supply and demand back in line, he said.

“As a result of lower prices, there will be downward pressure on production,” Birol said, adding that the market will rebalance in the coming months or quarters. “As a result of lower prices, there will upward pressure on demand.”

Oil slumped by almost half in 2014 as the Organization of Petroleum Exporting Countries maintained output amid the fastest U.S. production in three decades, perpetuating a surplus. Prices rebounded this month as oil producers idled rigs and cut investment. Demand is growing and the market has turned “calm,” Saudi Arabia’s Oil Minister Ali Al-Naimi said Wednesday.

The balance between supply and demand is already looking more positive, London-based Energy Aspects said in a report Feb. 24. Global oil consumption expanded by 2.2 million barrels a day in December from a year earlier, the strongest growth in 18 months. Violence in Libya and bad weather in the Persian Gulf have also disrupted supply to world markets this month, the consultant said.

Price Rebound

Brent crude for April settlement fell 18 cents, or 0.3 percent, to $61.45 a barrel on the London-based ICE Futures Europe exchange at 1:13 p.m. London time. The international benchmark has risen 36 percent from a near six-year low of $45.19 a barrel on Jan. 23.

Investment in oil production might fall by $100 billion this year, putting upward pressure on prices in the second half of the year, Birol said at the World Economic Forum in Davos on Jan. 21. The U.S. will pump 200,000 barrels a day less crude this year than previously estimated as companies cut back, the IEA said in a report Feb. 10.

The number of rigs targeting oil in the U.S. shrank by 37 last week to 1,019, the fewest since July 2011, data from Baker Hughes Inc. showed Feb. 20. Since Dec. 5, a total of 556 have been taken out of service. Oil producers including Royal Dutch Shell Plc and Chevron Corp. have announced spending cuts of almost $50 billion since Nov. 1, according to company statements compiled by Bloomberg.

Chinese energy demand growth is slowing and will continue to do so in the coming years, Birol said Thursday. Iraq faces a “structural issue” in dealing with Islamic State militants who control parts of the country and that won’t be resolved in the short term, he said.

http://www.bloomberg.com/news/articles/2015-02-26/correct-stronger-oil-demand-tighter-supply-to-balance-mkt-iea