The global oil supply-demand balance is showing signs of tightening but "mixed signals" on the demand side and the question of whether OPEC will sustain production cuts lend an air of uncertainty as to the market's direction.
OPEC production cuts, sanctions on Iran, and falling Venezuelan output have allowed Brent crude oil prices to rebound from around $50 per barrel toward the end of 2018 to just over $70/bbl on April 10, the International Energy Agency said in its latest monthly oil market report, released April 11.
"As far as 2019 is concerned, amongst the analyst community there is an extraordinarily wide divergence of view as to how strong growth will be," the IEA said. "We maintain our forecast of 1.4 [million barrels per day], but accept that there are mixed signals about the health of the global economy, and differing views about the likely level of oil prices."
The IEA pegged year-on-year Chinese oil demand growth for the first two months of 2019 at 410,000 bbl/d, while India saw growth of 300,000 bbl/d and the U.S., supported by its petrochemical sector, saw demand increase by 295,000 bbl/d.
"Although the main sources of demand growth are doing well, there are mixed signals from elsewhere," the IEA said, noting overall demand declined by 300,000 bbl/d in developed countries in the 2018 fourth quarter, "the first such fall for any quarter since the end of 2014, and it is likely to have fallen again in [the first quarter] due to weakness in some European economies, with perhaps more to come if there is a disorderly Brexit."
Noting that high oil prices are "less comfortable for consumers," the IEA said "only time will tell if our current demand forecast proves accurate."
On the supply side, the IEA noted crude oil stocks in developed countries falling to the five-year average was the yardstick by which the effectiveness of OPEC production cuts was measured.
"Data for February shows that stocks are above the average by 16 [million barrels]. However, in terms of days of forward demand cover, which is a more relevant assessment, they are below it, and have been for some time," the IEA said.