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IEA: January Oil Market Report

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Hydrocarbon Engineering,

Exceptionally mild temperatures in the early part of the winter in Japan, Europe and the US – alongside weak economic sentiment in China, Brazil, Russia and other commodity-dependent economies – saw global oil demand growth flip from a near five year high in the third quarter of last year, at 2.1 million bpd, to a one year low in the fourth quarter of 1.0 million bpd, according to the IEA Oil Market Report (OMR) for January.

Persistent oversupply, bloated inventories and a slew of negative economic news pressured prices so that by mid-January crude oil touched 12 year lows. The OMR outlook for 2016 has demand growth moderating to 1.2 million bpd.

Global oil supplies expanded by 2.6 million bpd last year, following hefty gains of 2.4 million bpd in 2014. By last December, however, growth had eased to 0.6 million bpd, with lower non-OPEC production that pegged below year-earlier levels for the first time since September 2012.

OPEC crude output eased by 90 000 bpd in December to a still-lofty 32.28 million bpd, including newly rejoined Indonesia. Iran, now relieved of sanctions, insists it will boost output by an immediate 500 000 bpd. IEA’s assessment is that around 300 000 bpd of additional crude could be flowing to world markets by the end of the current quarter.

Global inventories rose by a notional 1 billion bbls in 2014 - 2015, with the fundamentals suggesting a further build of 285 million bbls over the course of this year. Despite significant capacity expansions in 2016, this stock build will put storage infrastructure under pressure and could see floating storage become profitable.

Global refinery runs averaged 79.5 million bpd in the fourth quarter of 2015, down 0.3 million bpd from the estimate in last month’s OMR due to lower than expected throughputs in non-OECD Asia except China and a very high maintenance schedule in October. Global refinery margins weakened in December as middle distillate cracks fell and overwhelmed the resilience of gasoline and naphtha.

Adapted from press release by Rosalie Starling

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