Global oil demand is expected to pick up this year but supply is growing at a faster pace, leading to a rise in inventories in the first quarter of 2018, the International Energy Agency (IEA) said on Thursday.
The IEA raised its forecast for oil demand this year to 99.3 million barrels per day (bpd) from 97.8 million bpd in 2017.
Commercial oil inventories in industrialised OECD nations rose in January for the first time in seven months to 2.871 billion barrels, 53 million barrels above their five-year average, the Paris-based IEA said.
The January increase of 18 million barrels over the December inventory level was roughly half the size of rises normally seen at this time of year, according to the agency, which advises Western governments on energy policy.
But it said Venezuela, where an economic crisis has cut oil production by 50 per cent in two years to lows not seen in more than a decade, could still trigger a renewed drawdown in stocks.
“With supply from Venezuela clearly vulnerable to an accelerated decline, without any compensatory change from other producers, it is possible that the Latin American country could be the final element that tips the market decisively into deficit,” the IEA said.
In a bid to drain inventories, the Organization of the Petroleum Exporting Countries, Russia and several other producers have been implementing a deal to cut output by about 1.8 million bpd from January 2017 until the end of 2018.
Assuming no change in Opec output for the rest of the year, the IEA said it expected a small increase in OECD inventories in the first quarter of 2018 with declines after that.
The agency said it expected supply from non-Opec nations to grow by 1.8 million bpd in 2018 to 59.9 million bpd, led by the United States, where crude output was forecast to rise by 1.3 million bpd during 2018 to more than 11 million bpd by the end of the year.
Opec crude output fell in February to 32.1 million bpd, led by Venezuela and the United Arab Emirates.
The IEA raised its estimate for demand for Opec oil to 32.4 million bpd for 2018 from last month’s forecast of 32.3 million bpd.
The agency said the decision by US President Donald Trump decision to impose tariffs on imports of steel and aluminium, which has prompted threats of retaliation from major trading partners, posed a risk to global economic growth forecasts.
“A slowdown would have strong consequences, particularly for fuel used in the maritime sector and in the trucking industry,” the IEA said.