Focus: Monthly IEA Report
The past week saw the IEA (International Energy Agency) release its monthly report. The IEA, which is a cooperative effort of OECD countries, focuses on the global supply/ demand equation. Once again, the agency stressed the relatively tight supply situation and prospective draw down in stocks as a continuing support to energy values. Highlights of the report include the following:
• Strength in crude values to record high levels was linked to falling crude and product inventories in major consuming areas of the U.S., Japan and Europe, reflecting strong demand from the transportation sector for gasoline in the U.S. and diesel in Europe. Commercial stocks in OECD countries during the third quarter declined by 360 tb/d, a counter seasonal draw.
- World demand forecasts were left unchanged at 85.9 mb/d in 2007, an increase of 1.5 percent, while prospects for 2008 remain at 88.0 mb/d. A downward adjustment in economic growth assumptions was made but was offset by upward adjustments in non-OECD countries, notably FSU.
- World oil supply was increased by 415 kb/d in September to 85.1 mb/d. The jump in OPEC production levels helped lift this number along with increases from China and the U.S.
- The increase in supplies from OPEC of 500 tb/d will help lower the OPEC call by 400 tb/d in the 3rd quarter to 31.2 mb/d, but higher demand is projected to lead to 32.5 mb/d call in the fourth quarter.
Charts Courtesy of DTN
The report showed little evidence that the supply/demand situation has improved since the summer. The tight supply situation is a strong supporting influence, and it appears this trend will continue until either increased usage of alternative sources of energy or higher prices having the effect of curbing demand. Weather will be a key consideration for the short term outlook, but the weak dollar is softening the impact of high prices on many consumers. Although OPEC supplies are likely to increase and concerns over hurricane development are waning, a normal winter still presents a rather tight supply/ demand situation, which will necessitate a draw down of inventories through at least the 1st. quarter.
If you have any questions on Over The Barrel, pease contact Steve Platt at 1.877.377.7931 or stephen.platt@archerfinancial.com.
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