Over the past week the key agency forecasts have been published. The EIA STEO last Tuesday, OPEC published MOMR Thursday and the IEA published OMR this morning.
The IEA and OPEC’s demand growth expectations for 2017 are largely unchanged at 1.3 mb/d, still lower than our 1.5 mb/d estimate, while the EIA has revised its 2017 forecast for demand growth higher by 0.1 mb/d to 1.6 mb/d. Q1 17 demand growth was compressed due to weakness in the US, Germany, India and Turkey. Due to weak readings this year, the key agencies have all downgraded their US demand forecasts for 2017, although this ignores the likelihood of strong petrochemical demand in Q4 17 once 5.1 Mtpy of steam crackers start-up on the USGC.
Non-OPEC supply estimates were revised higher across the key agencies, largely led by more optimistic forecasts for US production growth. OPEC’s monthly report is the most optimistic, with 1 mb/d of non-OPEC supply growth expected in 2017, followed by the EIA’s and IEA’s expectation for 0.9 mb/d and 0.6 mb/d growth, respectively. We also expect very strong US growth, but our 2017 estimate of 0.7 mb/d is lower than OPEC’s estimate of 0.9 mb/d, matches the EIA’s, and is higher than the IEA’s 0.5 mb/d growth. The real divergence with the agencies however, remains in our estimate for non-OPEC supplies ex-North America, which we have declining by 0.4 mb/d, while the IEA, OPEC and EIA see this increasing by at least 0.1 mb/d.
OPEC compliance with the production deal remained high in April (OPEC’s monthly report pegs it at 111%, IEA: 96% and EIA: 101%). On our estimates, compliance rose m/m to 119%, as output fell for the 11 countries party to the deal, while Nigerian output (not subject to a cap) rose.
The call on OPEC crude in 2017 (excluding Indonesia) for each of the agencies (IEA: 32.8 mb/d, OPEC: 31.9 mb/d and EIA: 32.3 mb/d, with the latter two remarkably low due to continued demand underestimation) remain lower than our estimate for 34 mb/d, but the key agencies (particularly the IEA) do expect large stockdraws in H2 17, in line with our estimates. Meanwhile, even though visible stockbuilds have been limited, the OECD inventory overhang has fallen sharply through the first four months of the year as per IEA data. Stocks drew by 33 mb in March, reducing the overhang by 46 mb, and while preliminary data show OECD stocks building by 16.2 mb in April, the excess to the five-year average fell again, by 14 mb. Since January, the OECD crude overhang has fallen by 45 mb through to April, at a pace of 0.38 mb/d. The overhang in total commercial stocks is 91 mb lower than the February 2016 peak. It has fallen at a rate of 0.47 mb/d since January. Outright draws have accelerated further in May across both the OECD and non-OECD, with product stocks down sharply in Singapore and Fujairah as well.