The International Energy Agency (IEA) has released a new report stating that oil markets are set to rebalance as global inventories decline, but they describe the pace as “stubborn” and warn that producers need to maintain their resolve with respect to production cuts.
The IEA’s new monthly report claims that progress is being made in reducing inventories. In the second quarter, global inventories came down by half a million barrels a day. Early data for July seems to confirm this trend is continuing, with the US alone seeing a drawdown of 790,000 barrels a day. The leading official at the IAE warns, however, that it will take some time to get inventories back to the five-year average, pointing out that inventories are coming from “great heights”.
Assuming a continuing decline in inventories of half a million barrels a day, the IEA estimates that inventories will still be 60 million barrels over the five-year average when the current OPEC-led cuts expire in March next year. The IEA also points to a weakening resolve in respecting production cuts, with the 22 countries party to the OPEC-led agreement pumping a total of 470,000 barrels a day more than the agreed ceiling.
Subdued oil prices have pressured oil majors like ExxonMobil, whose lubrication products are sold by Mobil UK distributors, to cut costs in a competitive price environment. ExxonMobil’s second-quarter results recently showed a doubling in profits over last year, but spending on exploration and capital expenditure was 24% lower.