Global oil production keeps rising in 2019 while demand stays flat, IEA says
Energize Weekly, February 20, 2019
A surge in global oil production while demand remains relatively stable will leave markets struggling to absorb production in 2019, according to the International Energy Agency’s (IEA) monthly market forecast.
The IEA raised its estimate for crude oil production growth in 2019 to 1.8 million barrels a day (MBPD) from 1.6 MBPD, while demand growth was unchanged at 1.4 MBPD.
This comes even with a pledge by OPEC members, in the Vienna Agreement, to cut production by at least 800,000 barrels a day. OPEC crude oil output was 930,000 barrels a day lower in January with 86 percent compliance with the agreement by OPEC members.
Compliance with the agreement by non-OPEC members, such as Russia and Kazakhstan, who joined the accord, was 25 percent, the IEA said.
Venezuelan oil was also being sharply cut by U.S. sanctions against the Maduro government. Venezuela’s production has dropped to 1.3 MBPD from 3.4 MBPD in 1998.
Meanwhile, non-OPEC output increased to 2.7 million barrels a day in 2018, and the IEA projects it will grow 1.8 million barrels in 2019. “This is mainly due to higher U.S. output,” the IEA said.
The U.S. Energy Information Administration (EIA) estimated U.S. crude oil production averaging 12 MBPD in January, up 8 percent from December.
The agency forecasts crude oil production at 12.4 MBPD in 2019, reaching 13.2 MBPD by 2020. The EIA has consistently been revising upward oil production forecasts for more than a year.
Most of the growth in American oil production will come from the Permian Basin in Texas and New Mexico.
EIA forecasts Brent spot prices will average $61 a barrel in 2019 and $62 a barrel in 2020, compared with an average of $71 a barrel in 2018.
Spot prices reached a two-month high in early February of $62 a barrel, with West Texas Intermediate crude oil about $10 a barrel lower, the IEA said.
The IEA demand growth forecast remained unchanged at 1.4 million barrels per day. “It is supported by lower prices and the start-up of petrochemical projects in China and the U.S. Slowing economic growth will, however, limit any upside,” the agency said.