IEA says strong oil demand growth helps market’s re-balancing

  • As 4 US Republican Senators urge Trump to avoid blockade of Venezuela oil shipments

Global oil demand will grow more quickly  than expected this year…, the International Energy Agency said on Friday.

The agency revised its 2017 demand growth forecast to 1.5 million barrels per day (bpd) versus 1.4 million bpd in its previous monthly report and said it expected demand to expand by a further 1.4 million bpd next year.

“Producers should find encouragement from demand, which is growing year-on-year more strongly than first thought,” the Paris-based IEA said.

“There would be more confidence that re-balancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve,” the IEA added.

The Organisation of the Petroleum Exporting Countries (OPEC) is curbing output by about 1.2 million bpd, while Russia and other non-OPEC producers cut half as much, until March 2018.

The IEA said OPEC’s compliance with the cuts had fallen to 75 percent in July, the lowest this year.

Meanwhile, four U.S. Republican Senators from oil refining states have urged the Trump administration not to block oil shipments from Venezuela as part of US sanctions against the country.

They said their advice became necessary because the blockage could raise costs for US fuel consumers.

Media reports on Friday said the US sanctioned President Nicolas Maduro and other Venezuelan officials after Maduro established a constituent assembly, run by his Socialist Party loyalists and cracked down on widespread opposition.

Us has not placed sanctions on the OPEC member’s oil industry.

The Senators are: John Cornyn of Texas, Bill Cassidy of Louisiana, and Thad Cochran and Roger Wicker of Mississippi.

In the letter seen by media, the Senators said that unilaterally blocking oil exports could also harm the US economy and Venezuelan people.

The US imports about 740,000 barrels per day of oil from Venezuela.

The White House did not respond to a request for comment on the letter, which was addressed to President Donald Trump.

“We believe it is critical to consider the role the US energy industry and refining sector play in our economic and national security interest,” the senators said.

“Blockading imports could inflict great harm on this industry and burden US taxpayers with the cost.”

The Senators said sanctions on shipments of Venezuelan oil to the United States could also increase the likelihood of a disorderly default by Venezuela, given the oil business as its main source of revenue.

They also said that creditors could then seize Venezuelan oil assets and cut off the government’s remaining sources of financing.

They also noted that such sanction could expand the interest of China and Russia in Venezuela’s oil business. Both countries have invested in Venezuela for years.

Sources have said the United States could use heavy crude from its Strategic Petroleum Reserve, held in caverns along the Gulf Coast, to relieve any short-term supply pressure.

This sources added would be visible if Venezuela’s shipments were blocked with nearly 680 million barrels of oil are in reserve.

A drilling boom in the United States has allowed the government to store more oil than it needs to meet international spare supply agreements.