This week has seen all three of the key agency forecasts published. On Tuesday, the EIA published STEO, OPEC released its MOMR yesterday, while the IEA published its OMR this morning.
Each of the key agencies show an outright fall in call-on-OPEC crude in 2019—justifying OPEC’s prudence— with the OPEC Secretariat and the EIA depicting the greatest slides, of 1.1 mb/d (to 30.5 mb/d) and 1.0 mb/d y/y (to 30.4 mb/d) respectively. The IEA, meanwhile, is the least bearish of the triumvirate, forecasting a much more modest 0.4 mb/d y/y dip to 30.6 mb/d. Furthermore, under the IEA’s softer paradigm, the call on OPEC rises in Q2 19 (+0.5 mb/d q/q) before falling back in H2 19 (-0.2 mb/d q/q in Q3 19, -0.3 mb/d in Q4 19).
Differing opinions about the extent of non-OPEC supply growth account for most of the differences between the agencies. The IEA, for example, predicts non-OPEC supply growth of 1.7 mb/d in 2019, much less than the EIA (+2.4 mb/d) and OPEC (+2.2 mb/d). The key area of disagreement is the US, where the EIA predicts growth of 1.9 mb/d in 2019, OPEC 1.8 mb/d and the IEA a more modest 1.5 mb/d, which is in line with our forecast. The other major difference is the IEA’s more pessimistic tone with regard to Norway (-0.1 mb/d).
Demand estimates are much closer, although we deem this to be somewhat problematic as each agency appears to be underestimating the apparent slowdown in demand—the EIA predicts growth of 1.45 mb/d in 2019, the IEA 1.38 mb/d and OPEC 1.24 mb/d. It is remarkable that the agencies have completely failed to reduce their 2019 growth estimate in the face of undeniable evidence of deteriorating macroeconomic conditions. Our own outlook is much more cautious and shows global oil demand growth easing back to 1.0 mb/d in 2019; the difference is largely attributable to our more conservative forecasts of both Chinese and OECD demand. We think OECD demand will decline by 0.3 mb/d in 2019, in stark contrast to the more exuberant forecasts of the EIA (+0.3 mb/d), IEA (+0.3 mb/d) and OPEC (+0.2 mb/d). The OPEC Secretariat, meanwhile, reflects our caution on Chinese demand (we see growth slowing to 0.3 mb/d in 2019), while both the EIA and IEA see little change from China’s 2018’s 0.5 mb/d expansion.
Preliminary data for February show a massive 30 mb counter-seasonal drop in commercial OECD stocks to 2,852 mb, flipping inventories to a 4 mb deficit to the five-year average. Crude stocks fell by just 0.2 mb, but the crude builds were paltry in comparison to the five-year average build of 19 mb, so stocks flipped to a 10.5 mb deficit versus the five-year average.