OPEC deal has eased supply glut, but US shale rising: IEA

The OPEC-led deal on oil production is beginning to reflect on the stockpile levels bringing the group closer to its target of clearing global supply glut, but the rise in US oil production could set fresh challenges in 2018, the International Energy Agency (IEA) said in its latest monthly oil market report.

“It is clear that strong demand growth in 2017, alongside a modest increase last year in non-OPEC output, and the cuts made by leading producers, has contributed to the extraordinarily rapid fall in OECD oil stocks,” the Paris-based agency said in the report published Tuesday.

A year ago, OECD oil stocks were 264 million barrels above the five-year average and now they are only 52 million barrels higher, with stocks of oil products actually below the benchmark, the report showed.

“With the surplus having shrunk so dramatically, the success of the output agreement might be close to hand,” IEA said.

However, the agency added that this may not necessarily be the case, noting that oil price rise has come to a halt and gone into reverse.

According to IEA’s supply/demand balance, the decline in oil stocks could also reverse, driven mainly by higher US oil production.

“In 2018, fast rising production in non-OPEC countries, led by the US, is likely to grow by more than demand,” it said.

The agency expects US crude output to soon overtake Saudi Arabia, and to potentially get on par with Russia by the end of the year.

Meanwhile, IEA slightly raised its global oil demand growth for 2018 to 1.4 million bpd.