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The oil market balance as OPEC and allies set in their production cut deal—bringing inventories down to their five-year average—could be reached in two or three months or so, Neil Atkinson, head of the International Energy Agency’s (IEA) oil industry and markets division, told Bloomberg Daybreak: Europe on Tuesday.
“As time has gone by and stocks have started to fall, it’s becoming quite clear that the five-year average is within sight, and it may only be another two or three months or so before the stocks actually reach that five-year average,” Atkinson said, commenting on reports that OPEC is considering ‘moving the goalposts’ on the deal, instead using seven or more years of average to measure the success of the cuts. Most proposals to change the current metric of assessing the success of the pact—the five-year average of commercial oil stocks in developed nations—would shift the inventory goal further out in time.
According to Atkinson, if OPEC were to move to a 10-year average, it would still have some way to go before stocks fall to that level.
Commenting on whether OPEC might possibly be moving the goalposts might signal that producers are not happy that oil prices have not rallied despite their cuts, Atkinson said that oil supply and demand are not “precision engineering” capable of pinpointing a precise oil price outcome.
Producers are currently happy to see that oil prices appear to have settled in the low $60s and a bit higher more recently, and they are now waiting to see how oil demand plays out, Atkinson said. Prices rallied even further on Tuesday afternoon.
If there were to be a serious disruption to global trade, it could negatively impact economic growth, which in turn would impact demand growth, the head of IEA’s oil industry and markets division said.
The IEA continues to see global demand growth this year at 1.4 million bpd-1.5 million bpd, which is “fairly strong” and about the same level as last year’s growth.
Regarding U.S. crude oil production, the IEA continues to expect it to grow by 1.3 million bpd in 2018 compared to 2017—“very, very strong growth in U.S. production”.
The IEA’s closely watched Oil Market Report for April that could shed more light on the agency’s supply and demand forecasts will be published on Friday. By Tsvetana Paraskova for Oilprice.com