IEA predicts near-record growth in non-Opec output in 2014

At the same time as Opec supply has been slipping, the IEA predicts in its monthly report that the oil output from non-Opec nations will rise by almost a record amount in 2014.

The International Energy Agency (IEA) estimated on Friday that non-Opec oil producers led by the United States, Canada and Kazakhstan will bolster supplies next year by the most since the 1970s, undermining the need for Opec’s crude.

Non-Opec producers will increase output in 2014 by a near-record 1.7 million barrels a day to 56.4m, the IEA said, boosting its forecasts from a month ago by 300,000 barrels a day.

Supply losses in the Opec members Libya and Iraq, which reduced the group’s output to a two-year low, are preventing the new shipments from calming oil prices, the Paris-based adviser to energy-consuming nations said.

“Non-Opec crude and other liquids supply scaled new heights lately” and this “surge looks less like a one-off than a preview,” the IEA said in its monthly market report. “Amid exceptional outages in Libya and Iraq, this gusher didn’t do much to douse oil markets, though. With Opec losses partly cancelling out North American gains, crude prices have remained well-supported.”

Crude from shale formations in Texas and North Dakota is helping America, the world’s largest oil consumer, to achieve its highest level of energy independence in more than two decades.

“If the IEA picture on the supply side is correct, there is a real risk that Brent prices will drop below $100 a barrel during 2014,” said Hannes Loacker, an analyst at Raiffeisen Bank International in Vienna.

Brent crude has been trading at around US$111 a barrel.

The jump in non-Opec supply prompted the IEA to trim estimates for the amount of crude Opec will need to provide next year, even as world demand increases. Opec’s 12 members will need to pump an average 29m barrels a day in 2014, about 100,000 less than the IEA had predicted last month and almost 1m a day less than the group is currently producing.

The 12 Opec members are: the UAE, Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia and Venezuela.

In September, Opec’s output slumped by 645,000 barrels a day to less than 30m a day for the first time in almost two years as labour unrest crippled Libya’s export facilities and Iraq conducted maintenance at its southern oil terminal, the IEA said.

Saudi Arabia, Opec’s largest member, maintained output above 10m barrels a day for a third consecutive month, according to the agency’s report.

The agency trimmed its forecast for global oil demand growth in 2014. It said world fuel consumption will increase by 1.1m barrels, or 1.2 per cent, to 92m barrels a day next year. That is about 100,000 barrels a day less than the IEA had forecast last month.

“Demand growth, as an improvement from the past few years, looks solid within the context of what’s been a weak macroeconomic environment,” said Amrita Sen, chief oil market strategist at Energy Aspects, a research company in London. “Non-Opec supply growth appears extremely robust, driven by North America but also the former Soviet Union as Kashagan in Kazakhstan and the eastern Siberian fields in Russia ramp up.”

The United States is expected to boost production by 830,000 barrels a day, or 8.1 per cent, next year to 11m a day amid supply growth at the Eagle Ford and Bakken shale deposits.

Kazakhstan made the biggest contribution to the IEA’s reassessment of 2014 supplies, with the start of the Kashagan field adding 140,000 barrels a day.

Total inventories of crude and refined products in the most industrialised nations equate to about 58.6 days worth of consumption, or 0.1 day above their five-year average, after increasing by 7.8m barrels in August to 2.7 billion barrels, according to the report.

* Bloomberg News