IEA: OIL DEMAND DROP
WSJ. The International Energy Agency on Friday highlighted ongoing "elevated" risks in the oil market, as it trimmed its forecast for an increase in demand this year following Russia's annexation of Crimea, but also warned of lower oil production.
In its closely watched monthly report, the Paris-based energy watchdog lowered its 2014 forecast for Russian oil demand by 55,000 barrels a day to total 3.5 million barrels a day following the country's annexation of Crimea last month and subsequent downgrades of the World Bank and International Monetary Fund's views of the country's growth.
Further economic sanctions and pressure on Russia's economy could cut its oil demand by a further 150,000 barrels a day this year, the IEA said.
The IEA's overall forecast for the increase in oil demand this year was cut by 100,000 barrels a day to 1.3 million barrels a day.
The IEA also lowered its expectations for the increase in oil supply from outside the Organization of the Petroleum Exporting Countries in 2014 by 250,000 barrels a day to 1.5 million barrels a day, largely as a result of declining production at old oil fields in Russia and a pessimistic outlook on hopes for the giant Kashagan oil field in Kazakhstan.
The Kashagan project has been beset by problems and isn't producing oil after a short-lived startup in 2013. The IEA said it expects production to come back in the second quarter of 2015 at the earliest.
"While non-OPEC supply growth is still forecast to be the highest in decades, expectations are being toned down somewhat," the IEA said.
The revision to its non-OPEC supply forecast saw the IEA increase its expectation of the demand for OPEC's oil this year by 300,000 barrels a day, even as the oil-producing group's output fell to its lowest in five months in March.
According to the IEA, Saudi Arabian oil production fell 285,000 barrels a day to 9.57 million barrels a day last month, its lowest level in almost a year, as refinery maintenance reduced demand from customers.
Iraq's production fell 340,000 barrels a day from historic highs last month as a wave of attacks on the important Kirkuk-Ceyhan pipeline curtailed exports from the north of the country, and infrastructure constraints hampered trade from the southern port of Basra.
Output from Libya remained constrained amid a monthslong political standoff with rebels that have held its eastern ports and prevented oil exports.
The IEA said the steep drop in OPEC's production last month would likely be short-lived, however, as Libya seems to be making progress toward reopening its eastern ports and Iranian oil output and exports are also creeping up.
According to the IEA, oil imports from Iran are well above their 2013 level and hit their highest since June 2012 in February. Iran's oil production was 2.8 million barrels a day in March, down slightly from the previous month, but still an increase of 100,000 barrels a day from the 2.7 million barrels a day it pumped on average last year.
Overall, the IEA warned many issues could still hamper global oil supply.
"Security risks continue to hover over the [Middle East and North Africa] region, and how long Iran can keep testing international oil sanctions is unclear," the IEA said.
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