A relentless increase in oil supply from the U.S. and Canada and
a surprise surge in Iraqi crude production last month is offsetting
demand pressures bought about by the cold winter in the U.S. and
geopolitical concerns over the rising tensions between Russia and
Ukraine, the International Energy Agency said Friday.
"While international tensions may be on the rise, pressure on
oil markets, ceteris paribus, seems set to ease," the Paris-based
energy watchdog said in its closely-watched monthly report on the
oil market.
The cold snap in the U.S., which has seen commercial oil
inventories in industrialized countries plummet this winter to hit
a whopping 154 million barrels below the seasonal average last
month, is abating. Meanwhile, oil supply looks comfortable. The IEA
expects supply from outside the Organization of Petroleum Exporting
Countries to rise by 2 million barrels a day in the first quarter
of the year, while a surprise surge in Iraq's output last month
boosted OPEC's output to more than 30 million barrels a day for the
first time in four months.
Iraq's oil production rose to its highest level since 1979 in
February, jumping by half a million barrels a day to reach 3.6
million barrels a day, the IEA said. Exports soared by almost
600,000 barrels a day to hit 2.8 million barrels a day as major
bottlenecks at the country's southern port of Basra were finally
removed.
The exceptional increase in oil exports is a big boost for the
country, which has struggled to meet ambitious oil production
targets it has set for itself in recent years. However, analysts
questioned whether February's increase in output is
sustainable.
Nonetheless, "the latest spike in Iraqi exports proves that even
in the face of these obstacles, Iraq's huge potential as supplier
cannot be dismissed," the IEA said.
Elsewhere, the IEA also raised its forecast for demand growth
this year by 100,000 barrels a day to 1.4 million barrels a day on
expectations of a more robust economic backdrop.
On Wednesday, OPEC made a similar move, upgrading its forecast
for demand growth this year for the second month in a row. The
oil-producing cartel increased its forecast by 50,000 barrels a day
to 1.14 million barrels a day.
Write to Sarah Kent at sarah.kent@wsj.com
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