14 September 2018, Sweetcrude, Lagos — The International Energy Agency, IEA, in its newly-released Oil Market Report, OMR, has said “tightening of the oil market is on the way”The tightening is expected to push oil prices to $80 per barrel this year.
Since the previous edition of this report, the price of Brent crude oil fell close to $70/bbl. However, IEA says oil price “is now flirting with $80/bbl”, thanks to two factors: continuation of Venezuela’s production decline, and approaching of November 4th when the US sanctions against Iran’s oil exports will be implemented.
In Venezuela, production fell in August to 1.24 mb/d and, if the recent rate of decline continues, it could be only 1 mb/d at the end of the year.
Evidence provided by tanker tracking data suggests that Iran’s exports have already fallen significantly but the organisation says the market must wait to see if the 500 kb/d of reductions seen so far will grow.
“If Venezuelan and Iranian exports do continue to fall, markets could tighten and oil prices could rise without offsetting production increases from elsewhere,” it said.
Supply from some countries has grown since OPEC’s Vienna meetings in June: Last month, Saudi Arabia and Iraq combined saw output increase by 160 kb/d. In Iraq’s case, exports have grown to such an extent that they are greater than Iran’s production, and there is still about 200 kb/d of shut-in capacity in the north of the country due to the ongoing dispute with the Kurdistan Regional Government.
“Based on our August estimates of production, OPEC countries are sitting on about 2.7 mb/d of spare production capacity, 60% of which is in Saudi Arabia,” the agency said.