Global oil demand may suffer as crude nears $80, warns IEA
"It is too soon to say what will happen this time, but we should examine whether other producers could step in to ensure an orderly flow of oil to the market and offset a disruption to Iranian exports", the agency said.
OPEC's success with the oil production cutting deal has been to a significant extent aided by Venezuela's catastrophically dropping production as the country grapples with foreign exchange shortage, US sanctions, and a devastating economic crisis.
Shortly after the U.S. announcement, Saudi Arabia, the OPEC cartel kingpin, acknowledged the need to work with producers and consumers to mitigate possible supply shortfalls, the IEA noted.
Record output from the United States pushed non-Opec supplies up by 2.1 million bpd year-on-year to 59.4 million bpd. On average over the past month crude oil imports averaged about 8.0 million barrels per day, 4.3% less than the same month a year ago. "But I think they'll be watching to see how quickly the sanctions come back and impact Iran's ability to place their barrels".
On top of that, Venezuela is set to hold a presidential election on May 20, an event that could be met with more painful USA sanctions.
Oil prices slipped on Wednesday, as a strengthening dollar overshadowed a USA crude inventory report that showed domestic crude stocks falling more than expected.
The agency trimmed its 2018 world demand growth projection by 40,000 barrels a day to 1.4 million a day, projecting total consumption at 99.2 million barrels a day.
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However, the cure for higher oil prices tends to be higher oil prices.
U.S. crude oil inventories decreased in the week to May 11, and the refining sector increased 149,000 barrels per day, the U.S. Energy Information Administration (EIA) said in a report on Wednesday.
Spot crude oil cargo prices are at their steepest discounts to futures prices in years as sellers struggle to find buyers for West African, Russian and Kazakh cargoes, while pipeline bottlenecks trap supply in West Texas and Canada.
"On balance, the report is tending more to the negative side".
Crude oil prices are also on the rise because the U.S. has recently withdrawn from the Iran nuclear deal which can potentially put at risk up to 500,000 bpd, according to analysts. "Demand for oil has been revised downwards for the second half of the year from April", PVM Oil Associates strategist Tamas Varga said. That suggests demand won't suddenly fall off of a cliff.
"The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality", it said. "It would be extraordinary if such a large jump did not affect demand growth".
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