IEA Warns OPEC+ Cuts Will Not Be Enough to Counter Fall in Oil Demand
April 15, 2020
The inventory report put out by the private firm API was released yesterday afternoon and it called crude oil stocks up 13.1 million barrels. This compares with the estimates for today DOE report to showed crude stocks up 11.7 million barrels. The API called gasoline stocks up 2.2 million barrels and the outlook for today is for a 6.4 million barrel build. The API called distillates up 5.6 million barrels and the outlook for today is a build of 1.4 million barrels. Cushing, Ok crude oil stocks in the API report were called up 5.4 million barrels.
Estimates for today’s propane inventory update are for stocks to decline by 124,000 barrels. The outlook is also that export volume will be up.
The International Energy Agency (IEA) warned on Friday that a cut of 10 million bpd by OPEC+ would not be enough to counter the huge fall in oil demand. Even with such a large cut in oil production, oil and product inventories would increase by 15 million bpd in the 2nd quarter of 2020.
“With demand destruction forecasts ranging from 15 million to 22 million barrels per day in April 2020 and these measures not even coming into place until May, we are likely to see a substantial overhang in the short-term,” said Nitesh Shah, director of research at New York-based WisdomTree Investments.
Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said that implementation of the international deal would be a logistical challenge that would take weeks at least. “Reducing upstream supply is not just turning off the tap or pushing a button. We would be surprised to see overall OPEC+ compliance at 50% through May,” he said. Production is also expected to decline in the US, Canada.
The US Energy Department is negotiation contracts with nine energy companies to store about 23 million barrels of domestically produced oil in the country emergency reserve to help relieve the supply glut. The department is renting the space to companies in the SPR, as a way to help companies suffering from the oil price decline and after Congress failed to fund another plan to purchase oil for the facility.
The head of the National Institute of Allergy and Infectious Diseases, Anthony Fauci, said that a May 1st target date for reopening the economy was a “bit overly optimistic,” citing a lack of critical testing and tracing procedures.