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Global oil stocks could be just weeks away from returning to their five-year average levels, the key metric to gauge the success of OPEC-led output cuts, as global demand growth holds and key producers continue to rein in production, the International Energy Agency said Friday.

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OECD oil stocks fell by a larger-than-normal 25.6 million barrels in February to within just 30 million barrels of their five year average, the IEA said in its latest monthly oil market report.

OECD oil stocks have now fallen for six of the last seven months and have declined sharply versus their five-year average, the key metric being used by OPEC to measure the success of its output cuts.

Speculating whether the OPEC-led output deal has now achieved its goal, the IEA said that OECD oil stocks, which are expected to continue drawing if the current cuts hold, will likely reach or even fall below the five-year average target in April or May.



"It is not for us to declare on behalf of the Vienna agreement countries that it is "mission accomplished", but if our outlook is accurate, it certainly looks very much like it," the IEA said.

OECD commercial oil stocks declined by 25.6 million barrels month-on-month in February to 2.84 billion barrels, the IEA estimated, the lowest level since April 2015. Preliminary data for March is mixed, the IEA said, with US stocks falling a further 17 million barrels on the month but higher crude stocks in Europe and Japan.


TRADE WAR SCENARIO


On demand, the IEA said it still expects global oil demand to grow by 1.5 million b/d to 99.3 million b/d this year, after an upward revision to the US demand picture was largely offset by a downward adjustment for China.

OECD oil demand during Q1 was revised up by 315,000 b/d, due to cold weather in the US and the start-up of a petrochemical project, while non-OECD demand in the quarter was revised down by 260,000 b/d due to weak Chinese data, the IEA said.

Noting that the current wider economic outlook still remains supportive of demand with strong OECD growth figures, the IEA said the ongoing trade dispute between the US and China is "introducing a downward risk to the forecast".

Under a scenario where global GDP growth is cut by 1% due to widespread rising trade tariffs, global oil demand growth would be reduced by roughly 690,000 b/d, the IEA estimated.

"Oil demand would suffer the direct impact of lower bunker consumption and lower inland transportation of traded goods, reducing fuel oil and diesel use," it said.


OPEC OUTPUT LOWER


On supply, the IEA said world oil production slipped by 120,000 b/d to 97.8 million b/d during March, after the OPEC-led oil producers cut output by 2.4 million b/d, significantly more than their pledged 1.7 million b/d.

Confirming estimates by S&P Global Platts, the IEA said a third of the March cuts cam3 as a result of unplanned reductions from Venezuela and Mexico, which have lost a combined 890,000 b/d versus the October 2016 baseline.

The IEA said that scheduled maintenance, unplanned declines and tighter supply discipline cut OPEC crude oil production by 200,000 b/d in March to 31.83 million b/d.

"Losses from Venezuela helped push OPEC crude output to the lowest level in nearly three years and raised (the OPEC cut) compliance to an eye-popping 163%," the IEA said.

The IEA left its outlook for non-OPEC growth this year unchanged at 1.8 million b/d, sticking to its view that US crude production will increase by 1.3 million b/d versus 2017 led by a shale oil recover.

--Robert Perkins, robert.perkins@spglobal.com
--Edited by James Leech, newsdesk@spglobal.com