LONDON (ICIS)--Crude oil demand growth rose by 2.4% in the second quarter, year on year, to 2.3m bbl/day as economic activity in developed countries remained strong, the International Energy Agency (IEA) said on Wednesday.
In its first Oil Market Report after Hurricane Harvey battered the crude oil hub of Texas, the Paris-based Agency said the US government and corporates may need to “review the robustness” of infrastructure in the southern state.
The IEA said Texas, with increasing exports of crude oil and derivatives, has “in some respects” become as important for the global crude market as the Strait of Hormuz in the Red Sea which allows Middle Eastern producers to send product overseas.
“For 2017, we have revised upwards our [crude oil demand] growth estimate to 1.6m bbl/day. OECD demand growth continues to be stronger than expected, particularly in Europe and the US,” said the IEA.
The IEA expects crude oil demand to average 97.7m bbl/day in 2017, and 99.1m bbl/day next year. In the fourth quarter of 2018, demand for crude is expected to reach for the first time 100m bbl/day.
The Agency confirmed OPEC’s figures published on 12 September showing a contraction in crude output for the first time in five months. OPEC producers, as well as 11 non-OPEC countries, agreed at the end of 2016 to freeze or cut output in order to prop up prices and lower the oversupply.
“OPEC crude output fell in August for the first time in five months, after renewed turmoil in Libya disrupted flows and others pumped less. The 12 members bound by OPEC’s supply pact raised their compliance rate to 82% from 75% during July. For the year as whole, their compliance rate is 86%.
“Ten non-OPEC countries cooperating with production cuts achieved more than 100% compliance for the first time.”
However, commercial crude stocks in the OECD countries – the 34 most developed nations – remained unchanged during July, the latest month the IEA has figures for.
However, stocks in July normally increased, it added, so the 3,016m bbl in stocks represented only a surplus of 190m bbl compared to the five-year average.
“OECD product stocks were only 35m bbl above the five-year average at end-July and could soon fall below it because of the impact of Hurricane Harvey.”
Harvey and its aftermath prompted the IEA to issue a call for improved infrastructure in Texas. While it said the oil market had coped “relatively well” with the challenges posed by this year’s hurricane season, future weather events could still impact the industry based in Texas and both government and corporates should think about measures to mitigate their effects.
Among other potential measures, the IEA mentioned reviewing the robustness of the Gulf Coast energy infrastructure including production facilities, refineries, crude and product storage capacity, as well as pelines and marine infrastructure.
“There is also an opportunity to examine whether more can be done by industry and government working together to strengthen energy security, perhaps including the provision of government-held product stocks in the US.
“With US export volumes expected to increase, the strategic importance of the Gulf Coast will only grow. The rise of the Gulf Coast as a major energy hub means that, in some respects, it can be compared to the Strait of Hormuz in that normal operations are too important to fail.”