Positive IEA Data Suggests Market Turn is Near.......

The IEA recently released its September Oil Market Report, which noted global oil demand is increasing and global oil supply is decreasing. Notably, the IEA stated that global oil demand is set to accelerate faster than anticipated this year, promoting a revision to the agency's forecasts. Specifically, the IEA noted that oil demand grew by 2.3 million b/d, or 2.4 percent, in the second quarter of 2017, prompting the Paris-based organization to increase its growth estimate for 2017 to 1.6 mb/d, or 1.7 percent. For 2018, the IEA is predicting growth of 1.4 mb/d, or 1.4 percent (likely conservative, considering improving demand in countries such as the U.S., China and Europe). This revision marks an uptick from the IEA's August forecasts, as shifting fundamentals are enabling demand to catch up with supply. In August, the IEA has anticipated annual growth would hit 1.5 mb/d, again an increase on July's 1.4 mb/d forecast.

Regarding the supply side, global oil supplies fell in August due to both multilateral measures aimed at stemming excess stock and unplanned outages. Notably, OPEC output fell in August for the first time in five months (following turmoil in Libya disrupted flows and other member countries reduced production). OPEC compliance levels in August hit 82%, and OPEC members plan to meet towards the end of September to further improve compliance. Overall, global oil supply fell by 720,000 barrels per day in August (now approaching the 5-year average - a critical level to support higher prices). As a result, Brent oil prices rose by over 5% this past week and and crucially the market is now in backwardation (a sign that the market is tightening and perhaps firmer prices are on the way). These positive data points highlighted by the IEA suggests that the energy markets could finally be in full recovery mode, following three painful years for the industry.