The ongoing rift between several Middle Eastern countries and Qatar is causing “logistical headaches,” the International Energy Agency (IEA) warned on Wednesday.
In its latest oil market report, the IEA noted that the political dispute hasn’t yet disrupted supplies but it has become an operational problem for lifters of Qatari crude, condensate and LNG (liquefied natural gas).
Seven countries, including Saudi Arabia and the United Arab Emirates have cut diplomatic ties with Qatar accusing it of backing terrorist groups, which the later denies.
“Abu Dhabi swiftly enforced a ban on oil tankers linked to Qatar calling at ports in the UAE, which could lead to a backlog of cargos and increased shipping costs,” the IEA said in the report.
“Qatar pumps just over 600 thousand barrels a day of crude and exports some 500 thousand barrels a day, almost exclusively to Asia. Buyers often co-load cargoes from elsewhere in the Gulf, typically sold as 500,000 barrel lots, onto larger tankers to reduce shipping costs. Due to the political row, crude from Saudi Arabia, the UAE and Bahrain cannot be co-loaded with Qatari crude, limiting co-loading of Qatari grades to crude from Iran, Iraq, Kuwait and Oman, which are not part of the dispute,” the IEA said Wednesday.
Oil output rises dispute production deal
OPEC crude output increased in the month of May despite an ongoing deal to cap production, the IEA report showed.
OPEC crude output rose by 290,000 barrels per day in May to 32.08 million barrels a day, the highest level seen so far this year. This is due to the restoration of oil production from Libya and Nigeria, which are exempt from supply cuts, IEA noted.
“Output from members bound by the production deal edged lower, which kept year-to-date compliance strong at 96 percent,” the report said.
Global oil supply also increased by 585,000 barrels per day in May to 96.69 million barrels a day, the IEA report also showed. As a result, output grew from a year ago by 1.25 million barrels a day, the highest annual increase since February 2016.
In May, the world’s largest oil producers agreed to extend their output cut deal into 2018. OPEC and 11 non-OPEC members, including Russia, signed the deal, but their efforts failed to impress markets. Brent fell almost 4 percent following their decision.
According to the IEA, crude prices dropped by about $1.50-2.50 a barrel on average in May, but more steeply after OPEC countries decided to extend their output deal, “reflecting lower expectations about the pace of global market rebalancing,” the IEA said in the report.
Oil prices moved slightly lower early on Wednesday following an OPEC report also detailing that overall production rose in May.
Nonetheless, the IEA has forecast that oil demand is set to increase in 2018 albeit modestly.
“Demand averages 97.84 thousand barrels a day in 2017, rising to 99.27 thousand barrels a day in 2018 and breaching the psychologically important 100 thousand barrels a day threshold in the fourth quarter of 2018,” the IEA said.
Source: CNBC
