Key agency forecasts

Published at 12:17 13 Jun 2018 by . Last edited 15:17 13 Jun 2018.

The past two days have seen each of the three key agencies publish their monthly forecasts. The EIA's STEO and OPEC's MOMR came out yesterday, while the IEA published OMR this morning.

The forecasts of the key agencies carry heightened significance this month, arriving as they do on the eve of one of the most eagerly anticipated OPEC meetings in many years. The key statistic to digest is the H2 18 call on OPEC, and a clear dichotomy exists. The EIA and IEA respectively predict 31.7 mb/d and 31.9 mb/d, while OPEC cites 33.3 mb/d, largely driven by an underestimation of OPEC NGLs (particularly ethane). Essentially, with current OPEC production just below 32 mb/d, the EIA and IEA are encouraging OPEC to stand pat. Our own analysis shows a marginally tighter H2 18 call of 32.7 mb/d.

Adding 2019 forecasts for the first time this month, the IEA estimates that the call on OPEC will deteriorate slightly to 31.6 mb/d. The EIA is slightly less pessimistic at 31.8 mb/d, while our own numbers show a tighter 32.7 mb/d. The discrepancy comes from divergent non-OPEC supply forecasts: the EIA forecasts growth of 2.5 mb/d in 2018 and 1.8 mb/d 2019, the IEA 2.1 mb/d and 1.7 mb/d respectively. We remain more circumspect, predicting non-OPEC supply growth at 1.8 mb/d in 2018 and 1.0 mb/d in 2019. Our forecasts reflect infrastructure constraints in North America and higher declines from years of underinvestment elsewhere.

Although the IEA likely misses the changing pace of demand growth, predicting both 1.4 mb/d in 2018 and 2019, its absolute demand estimate in 2019 is close to our own. The EIA, meanwhile, looks too bullish on 2019 growth, at 1.7 mb/d. This is largely because it overestimates non-OPEC supply to an even greater degree, with the quasi-logic being that prices would be lower in their scenario hence less damaging for demand. The EIA similarly, but more logically, was the most upbeat demand forecaster for 2018, at +1.8 mb/d, vs OPEC (and ourselves) at +1.6 mb/d, then the IEA at 1.4 mb/d. Q2 18 demand figures have come in weak, however, particularly as Saudi demand fell off a cliff in April according to preliminary indications. Summer temperatures should have supported a seasonal rise from May onwards, but the overall pick-up was muted.

Preliminary May stock numbers for the OECD point to stocks building by more than the five-year average, the first such instance since May 2017, by 25.60 mb to 2,835 mb. This reduced the deficit to the five-year average to 25.3 mb, with crude’s deficit reducing to 21.3 mb. Crude stocks rose by 12 mb, while product stocks, led by LPG, rose by 14 mb. April inventories fell counter-seasonally, however, driven by sharp declines in distillate stocks and small falls in crude

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