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Monday, December 11, 2017

Greater volatility in the oil market - IEA

According to the March oil market report by the International Energy Agency (IEA), oil demand is estimated to fall by 2.3 mbd between the 1st and 2nd quarters of 2004, due to the arrival of warmer weather in the northern hemisphere bringing an end to the winter heating season. The bulk of the reduction in demand will take place in the OECD Pacific (1.4 mbd) and in the FSU (0.5 mbd). The arrival of the summer driving season subsequently will contribute to a surge of activity with North America accounting for half of the estimated 2 mbd growth in 3rd quarter global oil demand.

Under normal circumstances, the oil markets adjust to these seasonal variations by building and drawing stocks. The capacity and quality limitations of the North American refining sector are such that the demand for gasoline and blending components is increasingly satisfied by imports from Europe and Asia. Since 2000, North American gasoline imports have increasingly come from the ARA region (Belgium, Germany and Netherlands), other Europe, and FSU at the expense of imports from Venezuela (especially for 2002 and 2003).

Click here for an overview of OECD net oil products imports by area on the INTERTANKO website:

Market developments suggest that this year’s transition is likely to be more difficult and subject to greater volatility than normal. Both North American crude oil and gasoline stocks are tight in advance of peak demand. Tightness on the oil product side is reinforcing developments on the crude side. This situation, already exacerbated by structural elements and the supply policy of producing countries, could be further tested by geopolitical developments. OPEC’s proposed 1 April target reduction keeps the market on edge in the face of global demand growth reinforced by the perceptions of mounting tension in Nigeria and Venezuela. Underpinning these developments is limited spare global production capacity estimated at less than 2 mbd, of which 0.95 mbd is that of Saudi Arabia.