LONDON: Oil markets look “adequately supplied for now” after a big production increase in the last six months, but the industry is coming under strain, the West’s energy watchdog said on Friday.
The International Energy Agency said in its monthly report that the world’s spare oil production capacity was down to 2 percent of global demand, with further falls likely.
“This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” the Paris-based organization said.
Members of the Organization of the Petroleum Exporting Countries (OPEC) and other exporters such as Russia agreed in June to raise output as the market appeared increasingly tight.
The price of global benchmark Brent crude has risen from around $45 a barrel in June 2017 and peaked at over $85 this month on bullish bets by speculators.
OPEC, Russia and others such as US shale companies had increased production sharply since May, the IEA said, raising global output by 1.4 million barrels per day (bpd).
Overall, OPEC had boosted production by 735,000 bpd since May as Middle East Gulf producers such as Saudi Arabia and the UAE more than compensated for declining output in Venezuela and Iran, which is facing US sanctions from next month.
Supply from Iran during September dropped to a two-and-a-half year low, the IEA said, as customers continued to cut back in the run-up to new sanctions, which start on Nov 4.
Iranian output fell to 3.45 million bpd, it said, down 180,000 bpd month-on-month. Iranian oil exports in September fell to 1.63 million bpd, down 800,000 bpd from recent 2Q18 peaks, the agency estimated.
“The decline may deepen significantly ahead of US sanctions — and subsequently as final cargoes are delivered,” said the IEA, which advises major oil consumers on energy policy.
But, the outlook for world oil consumption is faltering, the IEA said as it cut its forecast of global oil demand growth by 0.11 million bpd for both this year and next to 1.28 million bpd and 1.36 million bpd respectively.
“This is due to a weaker economic outlook, trade concerns, higher oil prices,” it said.
OECD commercial stocks rose by 15.7 million barrels in August to 2.854 billion barrels, their highest level since February, on strong refinery output and liquefied petroleum gas restocking, the IEA said.
It added that OECD inventories were likely to have risen by 43 million barrels in the third quarter, the largest quarterly increase in stocks since the first quarter of 2016.
“The increase in net production from key suppliers since May of approximately 1.4 million bpd, led by Saudi Arabia, and the fact that oil stocks built by 0.5 million bpd in 2Q18 and look likely to have done the same in 3Q18, lends weight to the argument that the oil market is adequately supplied for now,” the IEA said.
World oil market ‘adequately supplied for now’ — IEA
World oil market ‘adequately supplied for now’ — IEA
- OPEC and other exporters such as Russia agreed in June to raise output as the market appeared increasingly tight
- The outlook for world oil consumption is faltering, the IEA said
Closing Bell: Saudi main market closes the week in red at 10,526
RIYADH: Saudi equities ended Thursday’s session modestly lower, with the Tadawul All Share Index slipping 14.63 points, or 0.14 percent, to close at 10,526.09.
The MSCI Tadawul 30 Index also declined 3.66 points, or 0.26 percent, to 1,389.66. In contrast, the parallel market outperformed, as Nomu jumped 237.72 points, or 1.02 percent, to close at 23,430.93.
Market breadth on the main market remained tilted to the downside, with 156 stocks ending lower against 99 gainers.
Trading activity eased further, with volumes reaching 80.46 million shares and total traded value amounting to SR1.66 billion ($442 million).
On the movers’ board, Saudi Industrial Export Co. led the gainers, rising 6.6 percent to SR2.10, followed by Consolidated Grunenfelder Saady Holding Co., which advanced 6.43 percent to SR9.60.
Raoom Trading Co. climbed 4.36 percent to SR61.05, while Astra Industrial Group gained 4.35 percent to close at SR139. Riyadh Cables Group Co. added 3.77 percent to end the session at SR135.00.
On the downside, Methanol Chemicals Co. topped the losers’ list, falling 5.96 percent to SR7.41.
Flynas Co. retreated 5.43 percent to SR61.00, while Leejam Sports Co. dropped 5 percent to close at SR100.80.
Alramz Real Estate Co. slipped 4.64 percent to SR55.50, and Almasane Alkobra Mining Co. declined 4.55 percent to SR84.00.
On the announcement front, ACWA Power said it has completed the financial close for the Ras Mohaisen First Water Desalination Co., a reverse osmosis desalination project with a capacity of up to 300,000 cubic meters per day, alongside associated potable water storage facilities totaling 600,000 cubic meters in Saudi Arabia’s Western Province.
The project was financed through a consortium of local and international banks, with total funding of SR2.07 billion and a tenor of up to 29.5 years, while ACWA Power holds an effective 45 percent equity stake.
Shares of ACWA Power ended the session at SR185.90, up SR0.2, or 0.11 percent.
Meanwhile, Consolidated Grunenfelder Saady Holding Co. announced the sign-off of a customized solutions project with Saudi Aramco Nabors Drilling Co., valued at SR166.0 million excluding VAT.
The 24-month contract covers the sale and maintenance of field camp facilities, with the financial impact expected to begin from the first quarter of 2026.
