Energy Report: When IEA Is Smiling

When IEA is smiling! Sure it’s like a morn in Spring, In the Lilt of market forecasts, it can make the oil swing! When IEA is bullish, all the world seems bright and gay, but when IEA is bearish, sure they'll take your oil rally away.

The International Energy Agency(IEA) thwarted an overnight American Petroleum Institute (API) report rally with a bunch of blarney and malarky about oil demand. The IEA has declared that a “supercycle” in oil demand is unlikely while admitting that the agency underestimated demand in their last report. In fact, the IEA has had a long track record of underestimating demand. They also say that oil demand may not return to pre-covid levels for 2 years and warned that some of the covid oil demand destruction may be permanent.  

Yet on the more bullish side of the IEA mouth, they did report that global oil supplies fell by 2 million barrels a day as Saudi production cuts and the cold snap in Texas reduced supply. They acknowledged that global oil stocks fell by 14.2 million barrels to 3.023 million barrels putting the global supply just 63 million barrels above the five-year average and that may be the best we see for a while as that deficit will melt away just like your heart when Irish eyes are happy!

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Image Source: Unsplash

The IEA agrees with what we have been saying for months that improving demand and OPEC cuts will lead to huge oil stock drawdowns in the coming months especially in the second half of the year. The IEA is now on board with what we have been predicting for months. Yet they have a problem with what we and many are saying that we are in a new “super-cycle” for oil but also raises doubt about “peak" oil demand anytime in the near future.

The IEA said, "Oil's sharp rally to near $70 a barrel has spurred talk of a new super-cycle and a looming supply shortfall. Our data and analysis suggest otherwise," the IEA said in its monthly report. "For a start, oil inventories still look ample compared with historical levels despite a steady decline ... On top of the stock cushion, a hefty amount of spare production capacity has built up as a result of OPEC+ supply curbs," it said. Of course, remember the IEA totally missed the last super-cycle in oil back in the early 2000s making basically the same arguments. 

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