Global Oil Stocks Fall to Three-Year Low, IEA Says – Wall Street Journal

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An Iraqi oil technician checks a pressure gauge at the Nahr Bin Omar natural gas field, north of the southern Iraqi port of Basra.


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Commercial oil stocks in industrialized economies have fallen to their lowest level in three years, the International Energy Agency said Wednesday, in the latest sign that the global supply glut has been mopped up and the market rebalanced.

In its closely watched monthly oil market report, the IEA said commercial oil inventories for the Organization for Economic Cooperation and Development countries declined in March by 26.8 million barrels month-on-month to 62.819 billion barrels. That’s 1 million barrels below the latest five-year average metric widely used by oil market participants to assess the rebalancing process.

The IEA suggested the drawdown in stocks was evidence that efforts led by the Organization of the Petroleum Exporting Countries to cut crude output had succeeded in clearing up excess global supply that has weighed on the oil market since late 2014.

OPEC and 10 producers outside the oil-cartel, including Russia, have been holding back crude production by roughly 1.8 million barrels a day since the start of last year. The agreement, which was extended in November, is set to expire at the end of this year.

“For the first time since 2014, OECD stocks were below the five year average metric widely cited to measure the success of the OPEC/non-OPEC” agreement, the reported noted. Since the OPEC accord was implemented, OECD stocks have declined by 233 million barrels, the agency added.

OPEC crude output fell month-on-month in April by 130,000 barrels a day to 31.65 million barrels a day, mainly a result of production outages in Venezuela, according to the IEA.

However, the Paris-based organization lowered its global oil demand forecast for this year to 1.4 million barrels a day from a previous estimate of 1.5 million barrels a day, meaning world oil demand should average 99.2 million barrels a day in 2018. The IEA attributed the downward revision mainly to higher oil prices.

Crude prices climbed by more than 50% in the second half of last year, largely on the back of strong compliance with the OPEC-led plan.

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The market has also been bolstered by geopolitical risk to supply. President

Donald Trump’s

decision earlier this month to pull the U.S. out of the Iran nuclear deal sent oil prices to more than 3½ -year highs.

Oil prices eased off 3½-year highs on Wednesday. Brent crude, the global oil benchmark, was down 0.6% to $77.95 a barrel on London’s ICE Futures.

Iran currently exports around 2.4 million barrels a day of crude, according to the IEA. The U.S. is set to reimpose economic sanctions on Iran, which will frustrate the OPEC members oil output and further reduce global oil supplies.

“As key players continue how to react to the new policy…the market balance continues to tighten, though by slightly less than last month,” the agency wrote in the report.

The IEA also raised its growth forecast for U.S. crude output in 2018 by 120,000 barrels a day to 1.3 million barrels a day, largely due to strong shale oil growth. But the agency cautioned that “concerns about cost inflation and infrastructure bottlenecks…alongside a focus on investor returns are expected to limit additional growth this year.”

Write to Christopher Alessi at christopher.alessi@wsj.com