The world’s oil stockpiles increased only slightly in the first quarter and are set to decline in the second as demand picks up seasonally and OPEC constrains output, the IEA said Tuesday in its monthly report. Still, even if the Organization of Petroleum Exporting Countries and its partners prolong their measures when they meet next week, inventories will probably remain above average at the end of the year, it said.
Saudi Arabia and Russia, leading a push by 24 nations to reduce the oil glut, proposed on Monday that producers should extend their supply curbs when they meet on May 25 in Vienna. Their announcement sparked a rally in oil prices, which had sagged on signs the cutbacks made so far haven’t significantly depleted the world’s brimming fuel inventories.
“Rebalancing is here and, in the short term at least, is accelerating,” said the Paris-based agency, which advises most of the world’s major economies on energy policy. Nonetheless, “stocks at the end of 2017 might not have fallen to the five-year average, suggesting that much work remains to be done in the second half.”
Oil touched a five-month low of $43.76 a barrel in New York on May 5 amid slower demand growth and rising supply outside OPEC, particularly in the U.S. The IEA boosted its outlook for non-OPEC production growth this year by about 100,000 barrels a day to 600,000 a day.
The agency trimmed its estimate for first-half global demand growth by 115,000 barrels a day, citing weaker consumption in “previously solid countries” like India and the U.S., yet kept the full-year growth forecast steady.
OPEC’s rate of compliance with its promised cutbacks has averaged 96 percent this year, and despite the slowdown in consumption, the curbs seem to be taking effect, the IEA said.
Global oil inventories increased by 100,000 barrels a day in the first quarter — just 8 percent of their gain a year ago — and are set to drop by 700,000 a day in the second, the agency said. If OPEC keeps restraining production, stockpiles will fall by 1.5 million barrels a day in the second half.
Still, stockpiles in some of the most developed economies — the 35 nations making up the Organization for Economic Cooperation and Development — increased in April, signaling that OPEC’s work remains unfinished.