IEA Pours Cold Water On OPEC Optimism, Warns Global Oil Demand Shrinking

Tyler Durden's picture

Pouring cold water on yesterday's optimistic demand forecast projected by OPEC, which projected global crude demand growth to rise by 1.5mm b/d in 2018, this morning the International Energy Agency warned that the crude oil price rally could be short-lived because, contrary to OPEC's expectations, global oil demand will be weaker than expected this year and next. In its closely watched monthly oil report, the IEA cut its crude demand growth outlook by 100,000 barrels a day for 2017 and 2018, as the WSJ reported. The agency now expects demand to grow by 1.5 million barrels a day this year and 1.3 million barrels a day next year.

The IEA predicted that balances will likely show the crude market is oversupplied in Q4 2017 and the first half of 2018, with oil demand in 2017 at 97.7mmb/d, rising to 98.9 million in 2018. Meanwhile, non-OPEC Oil Supply is expected To rise by 700,000b/d In 2017 To 58.1mmb/d, and another 1.4 mmb/d in 2018 to 59.5mm b/d, led by shale output.

The IEA also noted that global oil inventories fell 63mm barrels In Q3, only second quarterly draw since 2014, with the call on OPEC crude seen at 32.6mmb/d in Q4, declining to 32.0mmb/d in Q1 2018.

However, "the highlight of the report was that they lowered their demand forecast," said Jens Pedersen, senior analyst at Danske Bank. The report also cautioned that "if the geopolitical concerns calm down, then prices could fall down again, so on the margin it’s a tad bearish."

The IEA noted that oil prices have risen roughly 20% since early September with Brent crude sustaining gains above $60 a barrel in recent weeks, on the back of supply disruptions and geopolitical tensions in the Middle East. But if those problems prove temporary, a “fresh look at the fundamentals” would likely show the “market balance in 2018 does not look as tight as some would like and there is not in fact a ‘new normal.’”

As noted above, the IEA’s findings stand in stark contrast to that of OPEC, which released its monthly oil report Monday. OPEC raised its forecasts for global oil demand for this year and next, touting increased market rebalancing and stability. The two reports come ahead of the highly anticipated OPEC meeting in Vienna on Nov. 30, during which the cartel and some other major producers are set to debate whether to extend an agreement to rein in production.

The IEA focused particularly on US supply, noting that growth in US oil output until 2025 will be the strongest seen by any country in the history of crude markets, making it the “undisputed” leader among global producers, per the FT.  The IEA predicted that technological advances that have enabled production from US shale oilfields to thrive will lead to growth of 8m barrels a day between 2010 and 2025, surpassing expansion rates enjoyed by any other nation.

“The US will become the undisputed global oil and gas leader for decades to come,” said Fatih Birol, IEA executive director. The country is expected to account for 80 per cent of the increase in global supply over the same period. “The growth in production is unprecedented, exceeding all historical records, even Saudi Arabia after production from the mega Ghawar field or Soviet gas production from the super Siberian fields.”

US tight oil production, which includes crude, condensates and natural
gas liquids (NGLs) will rise to 13m b/d by 2025, out of total US output
of 16.9m b/d.

Additionally, while the IEA said that global oil supply had risen in October by 100,000 barrels a day to 97.5 million barrels a day, driven by non-OPEC production in the North Sea and Mexico,  OPEC output fell by 80,000 barrels a day in October to 32.53 million barrels a day, as a result of lower production in Iraq, Algeria and Nigeria—the lowest level since May. The figure was roughly in line with OPEC’s own estimate of 32.59 million barrels a day.

Commercial petroleum stocks in the Organization for Economic Cooperation and Development—a group of industrialized, oil-consuming nations, including the U. S.—fell below 3 billion barrels in September, for the first time in two years, the IEA said.

The agency this week also released its annual World Energy Outlook, in which it said global oil demand would not peak before 2040, although demand growth should slow “considerably” after 2025 amid greater fuel efficiency and electrification.

IEA Executive Director Fatih Birol, who in recent months has been rather pessimistic on the oil outlook, said even as penetration of electric vehicles drags down oil demand for passenger vehicles, global oil demand should continue to be strong through 2040 for commercial trucks, planes, ships and petrochemicals. “It’s too early to write the obituary of oil,” Mr. Birol said.

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eclectic syncretist's picture

OPEC wants prices up, IEA wants them down, that is all.

LawsofPhysics's picture

LOL!! 

What is oil?  Oil is in fact reduced hydrocarbons and potable energy (consumable calories).

With almost 8+ BILLION people all competing for the reduced hydrocarbons and energy that are required to maintain a decent standard of living, there is plenty of demand.

Having said that, one must realize that arguing about the "price" of anything in the absence of a mechanism for true price discovery is a fool's errand.

"Full Faith and Credit"

Crazy Or Not's picture

Lets say for sake of argument Russia and China are already trading domestic output of oil & gas with each other in Yuan / Roubles, and decide to keep it off the OPEC books "as a system check" - because why help the petrodollar if you're about to start competing with it?
Then it would make sense to reinsert these trades once the Petroyuan/Rouble kicked off - to give it initial volume???  

jimmy12345's picture

Technology gets better over time and we are in a period of energy deflation because of better extraction technology which makes more fossil fuels available at  a reasonable price.   Solar and battery prices will be 90% cheaper in 10 years and cause energy price defalation which means people will ahve more energy for a much lower price.   If ah hour and half the surface of the Earth receives more energy from the Sun than the amount of energy the US population uses in a year.  The cost of electric vehicles will cost the same as gasoline powered cars in 2 years.  In 10 years elecric vehicles will be far cheaper and better than gasoline powered cars.   Humanity will be far richer in 10 years.

SmallerGovNow2's picture

electric vehicles are crap.  why?  batteries.  production, waste, disposal, etc...  will turn the planet into a hell hole...

jimmy12345's picture

EV's will be cheaper and 99% cleaner than gasoline powered cars

LawsofPhysics's picture

Yeah, my father said this in 1971.

yarpos's picture

Lets see digging up copper from a mine, polluting the earth with acids and solvents to process it, poisonous tailings ponds, smelter slag.

Mining lithium and cobalt from mines and the toxic processing of it.

Recharging the batteries with coal fired power plants.

No real clue how to recycle most of it

Yeah, EVs are so much cleaner

EddieLomax's picture

Its Entropy.  The problem with all energy sources is concentration, yes the world gets more sunlight on it than we can use, but its spread over the entire surface of the earth.

Look at it this way, if I tipped a dumper truck with 1 million dollars of 1c coins onto your front lawn you would be rich even if it took 3 months to shift them.

If I tip the same number across a 10 mile strip of the Rockies you could be at it for 20 years and still not get a fraction of them, hence we should only get excited about what we can get concentrated, not over a planet wide surface.  Solar will get cheaper, but its far from todays oil EROEI, let alone the 1-100 we used to get in the 1900's.

LawsofPhysics's picture

IN ADDITION there are NUMEROUS biological cycles that MUST keep turning and that also REQUIRE ENERGY input!!!! If any one of these cycles stops, life on earth ends, period. What makes it even WORSE is the fact that humanity is using fossil fuels to accelerate many of these natural cycles!!!!

Just think if Dupont stopped fixing nitrogen for fertillizer, kiss one third of the human population goodbye overnight.

jimmy12345's picture

If the USA put solar panels on less that 1% of the USA, it would provide energy for the entire country.

Arnold's picture

Fracking in the new era is profitable, for a large part, because the 'cats went bust and assets were reacquired at a discount.
Well head production decline in many plays, requires constant exploration, and the North East infrastructure for handling product is still in a new infancy.

LawsofPhysics's picture

Yes, technology advances, slowly...

I have several patents asshat, developing any technology and bringing it to market requires a tremendous amount of capital, resources, and TIME.

Baby-mommas reproduce much faster than technology advances, this is THE problem you stupid fuck. That, and using precious capital and resources to bailout useless fucks in banking and finance!!

jimmy12345's picture

You obviously know nothing about energy or economics.   The income per person has grown steadily in the USA and the entire world decade over decade. So you statement, "Baby-mommas reproduce much faster than technology advances, this is THE problem you stupid fuck." is entirely untrue.  Utilitiy scale solar is selling for 2 cents a watt unsubsided is some places.   Additionally the cost of solar power has fallen 90% over the past 10 years and will fall another 90% over the next 10 years.

jimmy12345's picture

You obviously know nothing about energy or economics.   The income per person has grown steadily in the USA and the entire world decade over decade. So you statement, "Baby-mommas reproduce much faster than technology advances, this is THE problem you stupid fuck." is entirely untrue.  Utilitiy scale solar is selling for 2 cents a watt unsubsided is some places.   Additionally the cost of solar power has fallen 90% over the past 10 years and will fall another 90% over the next 10 years.

Dontblamethegoat's picture

Perhaps ... but it it doen't benefit the status quo, what makes you think they will let that happen?

In 1900 when oil use exploded across the globe, there really was no status quo with power to stop Rockefeller et al. 

Those days are gone.

 

Joiningupthedots's picture

Theres the small matter of over supply?

 

LawsofPhysics's picture

yeah, we have enough for about six months.

How much does the world use every single day again?

LMFAO!!!

Ecclesia Militans's picture

Is shale fracking really an economical model that can be sustained for cheap(er) energy consumption in the US?  A televised special I saw with my wife a few days ago says that the US has barely touched 10% of it's fracking potential in the Permian Basin alone, and that percentage represented 1 billion (with a 'b') barrels of oil.

Arnold's picture

ROI.
Energy for extraction and other factors make it still an expensive recovery.

SmallerGovNow2's picture

well since the USSA burns through oil at about 10 million bbl/day, that's only a 100 day supply...

SmallerGovNow2's picture

I stand corrected so it's only a 50 day supply...

SmallerGovNow2's picture

top ten countries demand...

1  United States 19,396,000 2015.  European Union 15,000,000[5] 2017. 2  China 11,968,000 2015. 3  India 4,159,000 2015. 4  Japan 4,150,000 2015. 5  Saudi Arabia 3,895,000 2015. 6  Brazil 3,157,000 2015. 7  Russia 3,113,000 2015. 8  South Korea 2,575,000 2015. 9  Germany 2,338,000 2015. 10  Canada 2,322,000 2015.
Cloud9.5's picture

For there to be a market, there must be two prime players, buyers and sellers that are free to negotiate price. We are sitting here on the edge of a cratered economy and musing over why gas prices have not risen while production rates in Alaska, the North Sea and Mexico continue to decline.

On the seller’s side, i.e. the production side, there is a rather simple process in any mining operation. The large concentrations of the easy to get at stuff are always mined first. As the operation begins to deplete those easy sources, innovators introduce new technologies to augment production. The steam engine came into its own because as coal miners dug deeper there was a need to pump water out of coal mines. Those engines did not put more coal in the veins that were being mined. What they did do was make some inaccessible coal accessible. At some point the veins play out or the techniques needed for extraction become cost prohibitive and production stops. Either way, at some point coal mines close.

 

On the buyer’s side, the sought after product must in some way increase income or enhance of the standard living for the purchaser. Oil does that for western civilization in a million ways. Oil is the single factor, the one ingredient, that if withdrawn will collapse our civilization in a matter of days. Nothing else is in place that can fuel our transports. Before alternatives could be brought on line the world wide supply chains would collapse. The resulting chaos would take down civilization.

For this simple reason, nothing about the oil market is real. Everything is contrived and controlled. Still, there is a dynamic that is playing out below the surface. It has to do with the declining ratio that exists between the energy consumed in production and the remaining net energy available for sale. We are very rapidly approaching a zero sum game. We are getting to the point that the calories invested in production are exceeding the calories produced by the process. This declining ratio is evidenced in declining profit margins. In a real market, when extraction costs rise to the point that they exceeded the product’s market price, production would simply stop.

That is not the case with oil. Unprofitable oil is being extracted the world over. The fact that it is not profitable is concealed first and foremost by a never ending line of credit that has been made available to producers. As long as the bills can be paid by borrowed money, the profit margins are irrelevant. The spice will continue to flow even at a loss. Secondly the full impact of this imbalance is being hidden to some extent by the simple fact that source of calories used in production are not identical to the calories produced by the process. Coal produced electricity will not power an F-16.

Oil production will continue and prices will continue to remain low as long as the exponential credit creation continues. When credit collapses oil production implodes.

https://ftalphaville-cdn.ft.com/wp-content/uploads/2013/01/Perfect-Storm-LR.pdf

wmbz's picture

"global oil demand will be weaker than expected this year and next"

Two words, or one, depending upon which way you say it... Bull Shit or Bullshit!

Arnold's picture

Another mild winter in the North East,
enough Diesel, Natty Gas, Ethanol Free Gasoline, and other finish product excess capacity to export...
Increasing poverty of the working class...
Neighbors not mowing their lawn, while thoughtfully keeping off mine...

rtb61's picture

It is not about the fossil fuels that have been mined or the fossil fuels that are about to be mined, it is about the fossil fuels underground, that will not be mined for years and decades and their value incorporated into the share value of fossil fuel companies. Diminishing demand means that for a lot of fossil fuel resources, where the cost of mining exceeds the value of the unrecovered resource, the company basically goes belly up leaving a ton of debt and that means a lot of companies all over the globe going bankrupt. Even those with low cost to mining will still be brought down by their ownership of high cost to recover resources, basically the whole industry will go belly up and the cheapest resources will be taken over by new companies.

So we are now in a periof of endless lies about fossil fuel values. They will lie and lie and lie and lie, via every possible venue, as they seel to package those crap assets and basically dump them in pension funds by hook or by crook, paying bribes to get those managing pension funds to buy those really bad high cost fossil fuel assets (some will survive for plastics et al).

They are desperately trying to retain the illusion of future value of fossil fuels assets that can not be recovered for years and that will be basically worth nothing, because the cost of extracting the fossil fuels will be higher than their worth.

EddieLomax's picture

Yes, companies are going bust because the cost of maintaining production does not cover what they produce.

But when we discover less than 1/10th of what we use in a year, and do this two years now in a row I call bullshit on the prices.  At some point we either need to enter this low oil usage utopia (drop usage by 90%) and  accept current prices are just right, or we have to price oil realistically to get what we need.  Now the market will do the job of pricing oil realistically whether we want it to or not, I'm betting this is a lot more likely then swapping our entire fleet of cars, vans, trucks, airplanes and ships over to electric.

Privyet_Jet's picture

hydrocarbons are not mined bucko they are extracted... gives me a good idea of your expertise in the area

EddieLomax's picture

In the US oil companies are lumped in as mining when it comes to talking about them.  Hence the US mining lost more in 2015(?) than it earned in the previous 7 years due to the fracking companies getting his by low oil prices, the story was on Zerohedge.

Arnold's picture

Hey, now we'll always have coal reserves.

EddieLomax's picture

I'm not sure how we can sustain 98 million barrels a day of production while putting so little resources into maintaining that production, it does not make sense.

In 2015 we found around 2.6 billion barrels of oil, in 2016 we found 2.4 billion barrels of oil, but we're burning 35 billion barrels of oil.

Those numbers have to eventually balance, I have no doubt that we'd find a lot more oil if the price required it, but unlike the budget where we can magic dollars out of thin air we cannot pretend oil exists when it doesn't.  The tight basins with their rapid depletion will feel the pinch first, but eventually everyone is going to have to put something in to make that oil found vs used as 35=35.

My money is on the price rising to make that 35=35.

SmallerGovNow2's picture

abiotic oil.  true the rate of man's extraction of the oil may exceed the earth's production rate.  but we'll never have zero oil...

EddieLomax's picture

Abiotic oil is rumoured but not proven and the evidence supports prehistoric era oil rather than the planets core having a big sponge of oil that slowly seems to the surface.

We will never run out of oil though, that's one of the key things about peak oil, but the rate we extract it is the interesting bit.

I note that the oil development and equipment companies share prices are high, seems like a lot of other people have seen the difference between found and used for oil and are expecting a sharp oil price rise followed by a scramble for reserves.

But if we do return to $100 oil then it will be ironic if that oil is all found in the US, will screw the Arabs over for decades.

SmallerGovNow2's picture

Think of it this way, at 90 million bbl/day we're extracting over 500 million cubic feet per day, or 19 million cubic yards per day.  that's enought to fill a football field over 11,000 feet high EVERY DAY.  That's a lot of decomposed dino shit.  No, the fossil fuel myth does not add up.

Consider also...

Proponents of so-called "abiotic oil" claim that the proof is found in the fact that many capped wells, which were formerly dry of oil, are found to be plentiful again after many years, They claim that the replenished oil is manufactured by natural forces in the Earth's mantle.

Critics of the abiotic theory disagree. They claim that capped wells may appear to refill after a few years, but they are not regenerating. It is simply an effect of oil slowly migrating through pore spaces from areas of high pressure to the low-pressure area of the drill hole. If this oil is drawn out, it will take even longer for the hole to refill again. They hold that oil is a non-renewable resource generated and deposited under special biological and geological conditions.

Until now these believers in "abiotic oil" have been dismissed as professing "bad science" but -- alas -- a new study has proven them correct!

Reported in ScienceDaily, researchers at the Royal Institute of Technology (KTH) in Stockholm have managed to prove that fossils from animals and plants are not necessary for crude oil and natural gas to be generated. The findings are revolutionary since this means, on the one hand, that it will be much easier to find these sources of energy and, on the other hand, that they can be found all over the globe.

Privyet_Jet's picture

see methane found on other planets

SmallerGovNow2's picture

yes, and on comets as well.  perhaps the dino's once roamed the galaxies... ?

EddieLomax's picture

I'd point out that we are effectively extracting stored sunlight gathered over millions of years, so the sheer amount of it should be huge.  The main reason there is not so much of it is the rare combination of a good source rock with a tight seal on top.  Even losing a drop a day would completely drain over a 350 million year timescale a billion barrel oilfield.

As for Abiotic oil, the biggest argument against it is why are we spending ever more money looking for sources of oil?  I think oil fields will naturally regenerate a bit over time as the oil seeps to lower pressure areas (or aquifier restores pressure), but I've never heard of an oil field becoming as good as it was new.  But assuming abiotic oil is true for a moment, how fast will it replenish.  If its a drop a day then it'll be full again in 350 million years, as always the point peak oil made wasn't running out of oil, that's a false argument as it will never happen, its the amount we can extract a day not being enough, that's the bit we really care about.

SmallerGovNow2's picture

agree it is the rate of mother earth's production versus man's rate of extraction that is the puzzle...

katagorikal's picture

Think of it this way (in metric please):
90m bbl/day is 14.3m m3/day or 5,200 m3/yr.

The Amazon basin is 7m km2 or 7,000,000m m2,
so oil volume covers the forest to depth of
0.002 mm/day or 0.75mm/yr.

Also notice that we have been extracting oil for 100 years,
but forests have existed for a few 100m years.

SmallerGovNow2's picture

We will only write an obituary for oil if the entire planet reverts to the stone ages.  "demand down amid greater fuel efficiency and electrification"...  bullshit.  Electric vehicles will never replace the internal combustion engine...  it's too efficient of a use of energy.  And electric vehicles STILL require oil to be produced and maintained.  Lots of it in tires alone not to mention all the plastics and other petroleum based products...

EddieLomax's picture

Yep, even the roads are made using oil!  Its insane when we look at how much we currently use.

jimmy12345's picture

60% od demand from oil comes from transport.  Electric vehicle will cost the same as gasoline pwered cars in 2 years and will be vastly superior and cheaper than gasonline powered cars in 10 years.

EddieLomax's picture

90% of transport relies on oil.

Dunno on electric, I've yet to see how you make a 300 mile trip without waiting hours for the batteries to recharge.  But I do like the idea of not polluting the local enviroment (mines/factory a different problem) and having a simple electric engine moving things around.

But how efficient are electric vans, lorries, busses and planes?  I've not got any data on them, also electric ships too as these use lots of oil.

SmallerGovNow2's picture

most ships are electric drive but still have huge generators to produce the energy that the electric motors consume...

silverer's picture

The generators that produce electricity run off batteries. There. Solved it for you. lol

SmallerGovNow2's picture

I like your Gore-logic...  (-: