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The IEA has revised downwards its estimated supply-demand imbalance for 2016 in its May Oil Market Report (OMR). It now sees production exceeding demand by 710,000 b/d for the year, down from 790,000 b/d last month.
However, the change is frontloaded and based on greater than expected demand in Q1. In fact, the IEA now projects the market will exit 2016 with surplus production of around 190,000 b/d in Q4, up from 160,000 b/d in its previous report.
Nevertheless, this still represents a considerable tightening of the market from the beginning of the year, with the IEA estimating a surplus of 1.41mn b/d in Q1. The tightening of the market means that unexpected supply outages can have a significant impact on market dynamics. Developments such as last month’s oil sector strike in Kuwait that knocked off around 1.7mn b/d of production for three days (MEES, 22 April) and further security-related outages in Nigeria would have larger effects.
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