The world will have to wait until October for additional oil supplies as production losses from Hurricane Ida wipe out increases in OPEC +, the International Energy Agency said.
Consumers should have enjoyed “solid gains” in production as the Organization of the Petroleum Exporting Countries and its allies continued to boost slack capacity, the agency said in its monthly report. Instead, global supply fell 540,000 barrels per day in August due to unexpected disruptions and will be stable this month.
“Unplanned production shutdowns have temporarily halted an upward trend in global oil supply that began in March, but growth is expected to resume in October,” said the Paris-based IEA, which advises the economies developed on energy policy.
The supply disappointment did not have a big impact on prices due to the downward trends in fuel consumption. Global demand for oil has been declining since July as rising covid-19 cases lead to restrictions on mobility in Asia, the IEA said. Crude has traded near $ 70 a barrel in New York City for most of this month.
Global fuel consumption will contract by 310,000 barrels per day on average each July through September, the IEA said. Still, there are signs the coronavirus resurgence is easing, and the agency expects demand to rebound sharply to 1.6 million barrels per day next month, with continued growth until the end of the year.
The corresponding changes in supply and demand have meant that the dominant trend in the oil market this year – declining inventories – has continued unabated. Fuel stocks in developed economies fell by 30 million barrels last month, placing them 186 million barrels below the five-year average, according to preliminary estimates from the IEA. There should be “big draws” again this month, the agency said.
“It is not until early 2022 that the supply will be high enough to allow oil stocks to be replenished,” according to the report. “In the meantime, strategic oil stocks from the United States and China could go some way to bridge the gap.”
Hurricane Ida, a Category 4 storm that hit the U.S. Gulf Coast on August 29, initially halted oil production of 1.7 million barrels per day. Weeks later, the industry is still struggling to restart many affected fields, and the region’s crude production is expected to drop to an average of 650,000 barrels per day this month, the IEA said.
The total loss of crude supply could amount to 30 million barrels, making Ida the most devastating hurricane to hit the Gulf oil industry since Katrina and Rita in 2005. Another storm, named Nicholas , made landfall in Texas last week.
While the bulk of OPEC boosted production in August, a handful of members and several allied producers saw production plummet. OPEC + ‘s overall crude supply fell from 150,000 barrels per day to 41.58 million barrels per day in August, as increases from Saudi Arabia, Iraq and Russia failed to offset losses in Nigeria, Kazakhstan and Mexico.
The group is expected to restart an additional 400,000 barrels per day of idle capacity this month, but members like Nigeria, Angola and Malaysia continue to struggle to increase production, the IEA said.