This week the key agency forecasts have been published. EIA published STEO on Tuesday, OPEC it’s MOMR yesterday and the IEA published OMR this morning.
This month saw the IEA publish, for the first time, detailed 2020 numbers for both demand and non-OPEC supplies. The IEA’s report contained some interesting conclusions. First, by predicting global oil product demand growth of 1.4 mb/d in 2020, the IEA appears very optimistic on global growth at a time when the global economy is grinding to a halt. Second, estimating non-OPEC supply growth of 2.2 mb/d in 2020, vs our 1.4 mb/d estimate, we feel that the IEA is somewhat overexuberant on non-OPEC supplies ex-US. However, the IEA’s estimates for North America are in line with ours. The IEA predicts the call on OPEC crude will fall by a sharp 0.8 mb/d, averaging 29.3 mb/d. Even if OPEC output held at May’s level of just under 30 mb/d, global stocks would build by nearly 0.6 mb/d, similar to our estimate of a 0.5 mb/d build. However, our builds arise from lower demand growth forecasts than the IEA.
Contentions regarding the latest agency numbers are not limited to 2020. For example, the IEA’s 1.2 mb/d 2019 demand estimate looks increasingly wild with each passing month, with our models showing growth clearly easing back to 0.9 mb/d. However, the IEA is not alone here, as both the EIA and OPEC are also too bullish on growth. The EIA now sees a 1.2 mb/d expansion in 2019 (curbed from last month’s 1.4 mb/d) and OPEC predicts a 1.1 mb/d gain (down from its previous 1.2 mb/d). Yet, the IEA somehow believes global demand growth was just 0.3 mb/d in Q1 19 and expects a jump in H2 19 to 1.6 mb/d. While global demand growth was slow in Q1 19 at 1 mb/d, led by an OECD contraction of 0.5 mb/d, non-OECD demand growth was higher than what the IEA claim, with the difference coming from Africa and LatAm.
Across all the key agencies, the 2019 call on OPEC has been reduced, although the IEA estimate is too low at 30.2 mb/d with OPEC Secretariat and the EIA converging around 30.4-30.5 mb/d. The call drops further in 2020 as per preliminary balances, pointing to stockbuilds next year. The EIA predicts a build of around 0.3 mb/d while we expect a build of 0.5-0.6 mb/d.
Preliminary data for May show huge commercial OECD stockbuilds of 58.4 mb m/m to 2,942 mb, led by a large build in the US. This would be higher than the five-year average OECD build of 34 mb and would push stocks above the five-year average by 41 mb. Crude stocks rose by 26.6 mb, versus the five-year average of 11 mb for the month, flipping inventories to a surplus to the five-year average by 18.9 mb. So, OPEC have to extend their cuts in H2 19.