The International Energy Agency (IEA) has confidently expressed that it believes the global demand for oil is growing as the OPEC-led production cuts hold up.
Figures for August showed that OPEC oil production dropped by 79,100 barrels per day (bpd), the first such decrease since March.
Neil Atkinson, who compiles the oil market reports for the IEA, expressed that oil stocks are decreasing when compared to the five-year average, even if progress is not as rapid as OPEC would no doubt prefer. The current OPEC-led production cuts still have six months left to run, but there are already ongoing discussions about extending them beyond March 2018.
Atkinson had a word of warning about the current lack of upstream investment, however. Following the oil price crash in 2014, many oil majors slashed their investment and exploration budgets to remain competitive in a low-price environment. For example, ExxonMobil, whose lubrication products are distributed through Mobil UK stockists, cut its capital spending from $43bn in 2013 to $23bn in 2016, with a focus on selectively investing in the more attractive opportunities.
According to Atkinson, there is a possible danger if there is no rebound in upstream investment in the coming years. Within five years, he sees a possibility of the world’s spare capacity, which is mostly located in OPEC countries, being “eroded to the extent there is very little spare capacity.” Such a tight supply situation could make the oil market vulnerable to price spikes again.