Global oil prices may remain under pressure this year given the weaker demand outlook and stronger than expected production from Iran and the US, the International Energy Agency says.

Attempts by OPEC states and other aligned producers to ‘rebalance’ the market by slowing the rise in global stockpiles may deliver only gradual results, the Paris-based agency said on Friday.

While OPEC and 10 other producers – including Russia, Mexico and Kazakhstan – have pledged to cut production by almost 1.2 million barrels a day for the next six months, the waivers the US granted on its sanctions against Iran saw the republic’s exports increase to about 1.3 million barrels a day in December.

The decline in Venezuelan production has also slowed, while more growth is expected in the US where liquids production increased by an “incredible and unexpected” 2.1 million barrels a day in 2018, the IEA said.

“While the other two giants voluntarily cut output, the US, already the biggest liquids supplier, will reinforce its leadership as the world’s number one crude producer,” the agency said in its monthly report on global oil markets. “By the middle of the year, US crude output will probably be more than the capacity of either Saudi Arabia or Russia.”

Brent crude oil futures surged last year – despite abundant global stockpiles – on speculation that Saudi Arabia wanted an oil price of US$80 a barrel for its since-deferred stock exchange listing of state oil giant Aramco. Prices got another boost later, on expectations that US sanctions on Iran would cut supplies to major importers including China, India and Japan.

But oil prices collapsed in November as US production set a new record, waivers were granted for Iranian exports and growth in China – the world’s second-largest oil consumer – showed signs of slowing.

Last week, the US Energy Department forecast a slow recovery for Brent prices during 2019 – averaging US$61 a barrel for the year and nearing US$63 by the fourth quarter. It is expecting global stockpiles to increase every quarter for the next two years due to production growth in the US, Canada and Brazil. March Brent was recently trading at US$62.58.

Sub-US$100 oil prices have reduced returns from New Zealand’s oil and gas sector, but crude and petroleum exports still brought in $1.06 billion in the year through November, 36 percent more than a year earlier, according to Statistics NZ.

Crude prices also drive the cost of fuel made at the Marsden Point refinery, and the country’s seasonal imports and exports of LPG.

Brent prices climbed last week on optimism a thaw in China-US relations will help sustain global growth, and after OPEC detailed the cuts it and other producers signalled at the start of December to help slow the build-up of stockpiles.

OPEC secretary-general Mohammed Barkindo last week said the organisation remains “acutely conscious” of the importance of a sustainable, stable oil market for the global economy.

The production controls first agreed two years ago are an “adaptable toolkit” that has allowed the group to flex output to respond to potential over-supply risks or consumer concerns that demand may be outpacing supply, he said in a speech in Angola on Friday.

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