In its latest monthly oil market report, the International Energy Agency (EIA) has revised its 2019 non-OPEC supply growth forecast down by 415,000 b/d to 1.5 million b/d, partly due to expected cuts from Russia, and to lower growth in Canada.
“By agreeing a cut of 1.2 million b/d, and additional output curbs in Canada, producers may go some way towards restoring balance to the world market,” IEA said.
In Canada, the serious build-up of stocks arising from logistical bottlenecks in Alberta led the provincial government to act very decisively to curb output. The initial cutback of 325,000 b/d for 3 months to allow blockages to ease is a substantial development, IEA said. Apart from lowering production, it should narrow the differential between West Canadian Select prices and West Texas Intermediate, which reached $51/bbl at one point.
In the US in the near term, it is infrastructure constraints that will limit supply growth compared with recent record rates. Growth of 2.1 million b/d for US total oil supply in 2018 is expected to slow to 1.3 million b/d in 2019. Crude oil production is seen rising by 1.6 million b/d and 1 million b/d in 2018 and 2019, respectively.
For 2019, IEA’s demand growth outlook remains at 1.4 million b/d even though oil prices have fallen back considerably since the early October peak. Some of the support provided by lower prices will be offset by weaker economic growth globally, and particularly in some emerging economies.
New data in this Report shows little change to IEA’s 2018 estimates. Demand will increase by 1.3 million b/d although there are signs that the pace is slackening in some countries as the impact of higher prices lingers.
As far as non-OPEC supply is concerned, IEA’s estimate for 2018 growth is revised slightly up to 2.4 million b/d.
Refining
Growth in global refining throughput is expected to have come to a sudden halt in the last quarter of 2018, as Latin America’s 530,000 b/d year-on-year decline, combined with the expectation of lower activity in Europe are only just offset by growth in China, the Middle East, and the US.
“While record US run rates this year are widely discussed, most other regions in the Atlantic Basin have seen reduced throughput. Indeed, the only instance of annual growth in the Atlantic Basin this year, in the third quarter of 2018, was largely due to the [year-on-year] rebound effect in the US from the Hurricane Harvey,” IEA said.
For 2018 the net effect of continued strong US throughput growth and declines in Mexico, Latin America, and Europe is a 300,000 b/d annual decline in the Atlantic Basin compared with a 500,000 b/d growth in 2017.
Global throughput, however, is up 700,000 b/d year-on-year, thanks to the sustained growth East of Suez, namely in China (up by 600,000 b/d) and the Middle East (300,000 b/d).
In 2019, the Atlantic Basin is expected to return to modest growth, with Mexico, Canada, and Europe recovering. China and the Middle East will continue to drive most of the volumetric growth. The US is already close to a ceiling as its high utilization rates show.
Source: OGJ
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