Surge In Oil From U.S., Canada Offsets Cold Winter & Jitters Over Ukraine
The dramatic increase in oil supply from the U.S. and Canada—coupled with a surprise surge in Iraqi output—helped stave off global demand pressures brought on by a cold U.S. winter and geopolitical concerns over rising tensions between Russia and Ukraine.
The International Energy Agency, a watchdog for the world’s biggest energy consumers, said North American output helped mitigate a bigger-than-expected draw from global crude inventories, caused by a colder than usual winter in the U.S. Surging Iraqi crude output, which rose to its highest level since 1979, also helped keep global markets supplied, and prices in check.
In recent years, new drilling and extraction techniques employed across North America—from shale-oil deposits in Texas to oil-sands reserves in Alberta—have boosted global supply. That has helped steady global prices, acting as a sort of shock absorber amid big, recent output disruptions.
U.S. and European economic sanctions against Iran have choked off a big chunk of Iranian oil to world markets, and Libyan unrest has all but shut off that country’s once-prodigious oil shipments. Recent worry centered on Russia’s moves in Crimea have also raised supply concerns.
“While international tensions may be on the rise, pressure on oil markets…seems set to ease,” the Paris-based energy watchdog said in its closely watched monthly report on the oil market.
The IEA on Friday said the extra North American crude has also insulated the world from potential oil-price volatility that often comes with extreme weather. A cold snap in the U.S. helped drain the country’s stores of oil and oil products this winter, dragging down the average volume of stocks held in industrialized countries.
Those global inventories came in 154 million barrels below the seasonal average last month. Meanwhile, the IEA boosted its forecast of global demand growth by 100,000 barrels a day, to 1.4 million barrels a day, for 2014. It cited expectations of a more robust global economic recovery.
North American supply, however, is helping to make up that shortfall in stored oil, and meet the growing global demand, the IEA said. The IEA expects supply from outside the Organization of the Petroleum Exporting Countries, the cartel of some of the world’s largest exporters, to rise by two million barrels a day in the first quarter of the year. Most of that, the IEA said, will come from North America.
That is keeping prices in check. Prices for both U.S. and international benchmark crudes have remained relatively steady over the course of the year, trading in a tight band. Future prices for U.S. West Texas Intermediate, for example, have bounced between $99 and $105 a barrel.