International Energy Agency warns global demand remains uncertain
Saudi Arabia has slashed its oil production by more than promised as part of a pact to boost oil prices, the International Energy Agency said on Thursday, while warning of mixed signals for global demand.
In its latest monthly oil market report, the Paris-based IEA said production by OPEC kingpin Saudi Arabia dropped to its lowest level in two years in March after the cartel agreed to cuts with Russia and other ex-Soviet states. However the IEA warned that demand fell in developed OECD countries by 0.3 million barrels per day (mbd) in the last three months of 2018—“the first such fall for any quarter since the end of 2014.”
OECD demand “is likely to have fallen again” in the first quarter of this year, it added, “due to weakness in some European economies, with perhaps more to come if there is a disorderly Brexit.”
While demand in China, India and the United States grew, the OECD warned that “the oil market shows signs of tightening” amid “mixed signals” over the global economic outlook.
In recent months the forecasts for global economic growth have been trimmed back on concerns about the impact of trade disputes, which come as export powerhouse China has been experiencing slower rates of expansion.
OPEC production meanwhile fell by 0.55 mbd in March to 30.13 mbd—a four-year low—largely due to cuts in Saudi Arabia and crisis-hit Venezuela, the IEA said. Venezuela is an OPEC member but exempt from the cuts as it struggles with political turmoil, sanctions and repeated power blackouts.
After a production glut led to prices dropping last year, OPEC members and allies including Russia agreed in December to trim production. OPEC states have complied by 153 percent to their pledged production cuts made under the so-called Vienna Agreement, the IEA said.
However non-OPEC states in the group have complied at a rate of 64 percent, with Russia lagging behind its target cuts. “Russia continues to adjust output gradually,” the IEA said, adding that “if the producers deliver on their promises, the market could return to balance” in the second quarter of this year.
The concerted push to raise prices has been successful, with the price of Brent crude rising from $50 a barrel in December to above $71 in early April.