WSJ : IEA Slashes 2015 Forecast Increase in Non-OPEC Oil Supply

IEA Slashes 2015 Forecast Increase in Non-OPEC Oil Supply
Price Recovery May Not Be Imminent But Signs Are Mounting That Tide Will Turn, Agency Says

LONDON—The collapse in oil prices is expected to slash growth in non-OPEC oil production this year, bolstering demand for the producer group’s own output, the International Energy Agency said Friday, indicating the Organization of the Petroleum Exporting Countries’ strategy to defend its market share may be working.

The decision taken by the oil cartel in November to abandon its traditional role of stabilizing the market and maintain its output in the face of falling prices has proved divisive even within the group. Oil prices, already under pressure from surging U.S. production and sluggish demand, tanked following the group’s decision and are now down more than 50% since June.

Oil prices ticked higher Friday, following steep losses this week. On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $46.86 a barrel, up 1.4%. March Brent crude on London’s ICE Futures exchange rose 1.2% to $48.84 a barrel.

The sharp drop in oil prices is also hitting non-OPEC producers. Companies are slashing capital expenditure and the number of rigs drilling and drilling permits in the U.S. has already decreased, suggesting that supply pressure could ease in the coming months.

“A price recovery—barring any major disruption—may not be imminent, but signs are mounting that the tide will turn,” the IEA said in its closely watched monthly oil market report, as it slashed its forecast for the increase in non-OPEC oil supply this year by 350,000 barrels a day. The knock-on effect of that is an expected increase of 300,000 barrels a day in demand for OPEC’s oil this year to 29.2 million barrels a day.

Still, oil production from the U.S. is expected to remain robust this year, with supply growth slipping by just 80,000 barrels a day, according to the IEA. Oil output from Canada and Colombia is expected to weaken slightly more, adding to the easing in supply growth.

Meanwhile, OPEC’s oil output continues to exceed demand projections and the group’s own output ceiling of 30 million barrels a day. According to the IEA, OPEC production rose by 80,000 barrels a day in December to 30.48 million barrels a day, marking its eighth straight month above the group’s official output target.