LONDON (ICIS)--Oil futures prices fluctuated wildly in June on the back of tensions in Iraq, the latest example of “extraordinarily high” supply risks from the Middle East and North Africa (MENA), the International Energy Agency (IEA) said on Friday.
Oil futures surged by $5/bbl to $115/bbl for Brent crude in the middle of the month due to fears that advancing insurgency forces in Iraq would stifle supplies, the France-based intergovernmental organisation said.
Prices settled back to earlier levels on perceptions that Iraq’s southern oil fields would remain untouched, and expected improved prospects for a recovery in Libyan exports, the agency said, but added that the current turmoil is indicative of ongoing supply risks in the MENA region.
“Supply risks in the Middle East and North Africa, not least in Iraq and Libya, remain extraordinarily high,” the agency said.
“The supply worries that had sparked last month’s rally have since abated somewhat, but that is only part of the story. Market concerns also appear to have shifted to demand, with both product deliveries and refinery throughputs showing signs, perhaps short‐lived, of counter‐seasonal softness,” it added.
August Brent futures are currently trading for around $108/bbl, while August WTI is changing hands for around $102/bbl.
Making its first predictions for 2015, the IEA forecast that global oil demand growth next year will accelerate to 1.4m bbl/day compared to 1.2m bbl/day this year, on expectations that macroeconomic conditions will continue to improve. Non-OPEC supply growth is expected to dip year-on-year in 2015 to around 1.2m bbl/day, the IEA added.
However, global demand estimates for 2014 have been cut by 130,000 bl/day to 92.7m bbl/day on the back of weaker-than-expected mid-year economic data. The agency attributed the global demand growth cut primarily to a weaker than predicted economic conditions in Europe, with a tepid recovery and prevailing double-digit unemployment cutting into oil demand.
OPEC supplies were broadly steady in June month on month at 30.03m bbl/day, as production gains in Saudi Arabia, Iran, Nigeria and Angola were offset by lower production levels in Iraq.
Refinery run rates were down year on year, as a result of planned and unplanned outages, capacity rationalisation and weak margins, the IEA added.
Oil prices remain high despite a slight softening of the oil market outlook, the agency said.
“While the market may thus be going through something of a soft patch, prices remain historically high and there is no sign of a turning of the tide just yet. Global refinery throughputs already seem to be rebounding steeply, buoyed in part by record runs in Russia, capacity increases in Saudi Arabia and a return from unplanned outages in the United States,” the agency said.
“The global economy is still expected to gain momentum in 2015,” it added.