World oil demand is growing more strongly than previously thought, but revisions to past data for demand from developing economies means the excess oil on the market will clear less quickly than initially expected later in 2017, according to the rich-world's energy watchdog.
In its latest monthly Oil Market Report, the International Energy Agency revised its forecast for oil demand growth in 2017 from 1.4m barrels per day to 1.5m b/d it forecast in July and said that same pace would be maintained throughout 2018.
The IEA also forecast demand growth would accelerate to a 1.8m b/d clip in the backhalf of this year.
However, "recently notified changes" to historical data indicated that demand in some developing countries had been overstated, forcing the agency to reduce its estimates of demand growth from countries outside the Organisation for Economic Cooperation and Development for 2015 and 2016 by 0.2m and 0.4m b/d, respectively.
"The impact of carrying this lower demand base into 2017 against unchanged supply numbers is that stock draws later in the year are likely to be lower than first thought", said the IEA.
At first glance, the growth in oil demand might suggest that market re-balancing was well under way; however, the IEA warned about falling levels of compliance with the November 2016 deal between OPEC and non-OPEC contries to curtail their combined output.
"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 compliance rate with OPEC's output cut fell again in July to a new low of 75% from June's revised figure of 77%. For those non-OPEC countries acting in support, their compliance rate in July was 67%. Together, the twenty-two countries are producing about 470 kb/d in excess of their commitment," the IEA said.
In passing, the Paris-based organisation also said it was "closely" monitoring the situation in Venezuela with regards to any impact it might have on the market should oil production and exports fall significantly.
Brent crude oil prices
had recently stabilised above $50 a barrel, conveying the message that the market was re-balancing, the IEA said.
Nonetheless, "if re-balancing is to be maintained, the producers that are committed to seeing the task through to March 2018 need to convince the market that they are in it together. It is not entirely clear that this is the case today."