Despite the huge uncertainties related to the two massive hurricanes that hit the U.S., the global oil market looks tighter than it has in a long time, according to a new report from the International Energy Agency.
Global oil supply fell in August for the first time in four months, the IEA said, a result of a dip in OPEC’s oil production, combined with refinery maintenance and sizable outages from Hurricane Harvey. World oil supply fell by 720,000 barrels per day (bpd) in August compared to July, a significant decline that will aid in the market’s progress towards rebalancing.
Multiple outages contributed to the decline in global output. Hurricane Harvey resulted in U.S. oil production falling by 200,000 bpd in August—outages that occurred mostly in the Eagle Ford shale and offshore in the Gulf of Mexico. But OPEC also saw its collective output fall by 210,000 bpd in August, mainly from disruptions in Libya.
The supply outages will go a long way toward adding some momentum to the rebalancing effort, even if some of them are only transitory.
Another notable issue, the IEA said, was that U.S. oil supply is quite a bit lower at this point than it expected, and not just because of Harvey. The agency singled out the fact that U.S. oil production actually declined in June from a month earlier, an unexpected development. That meant that the Harvey disruptions resulted in output declines from a lower-than-anticipated base.