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Crude supplies fall as cuts start to bite

Supplies fell to 94.1 million b/d in January, data from the International Energy Agency (IEA) showed

Global crude supplies fell by 235,000 barrels a day in January to 94.1 million b/d on lower Opec and non-Opec production, data from the International Energy Agency (IEA) showed. Demand continues to remain tepid.

Cuts in capital expenditures have lowered projected 2015 non-Opec supply growth to 0.8m b/d. In its latest monthly report, the IEA lowered its forecast for US oil production in 2015 by 200,000 b/d, at an average 12.4m b/d, with most of the cuts in the second-half of the year.

Investment cuts in US light, tight oil, while only making up a portion of the industry’s overall upstream budget cuts, will be among the first to be felt, thanks to their short lead time and treadmill-like spending patterns. Expectations of North American supply have been reduced by 500,000 b/d for the fourth quarter and 300,000 b/d for the third quarter, with reductions elsewhere biting later.

The swiftness of light, tight oil supply cuts will help put a floor under prices, just as their reversal when prices rebound in earnest might put a ceiling over them.

Opec crude output fell by 240,000 b/d in January to 30.31m b/d, led by losses from Iraq and Libya. Output from Saudi Arabia, Kuwait, Angola and Nigeria edged up.

Downward revisions to the non-Opec supply growth forecast has raised the call on Opec to an average 30.2m b/d during the second-half 2015 – just above the group’s official target of 30m b/d, said the IEA. The call on Opec for the first quarter 2015 has been trimmed, however.

Forecast global oil demand growth for 2015 remains unchanged at 0.9m barrels per day, bringing average demand for the year to 93.4m b/d, up slightly on the modest 0.6m b/d gain in 2014 as the macro-economic outlook improved, added the IEA.

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