IEA Report Indicates Trouble For China

The International Energy Agency published their oil market report for August, recapping recent oil action and revising 2014 demand down.

The agency expects demand of 29.8 million barrels a day for 2014, up 1.1 million from 2013, but lower than their original expectation. The elevated 2014 use corresponds with expected growth construction, manufacturing and auto sales for the year.

Housing starts are expected to grow by 14.7 percent, with construction as a whole growing eight percent. Auto sales are forecast to reach 15.8 million in 2014, up 3.3 percent from 2013, which showed 6.3 percent growth compared to 2012.

The report also issued concern for weakening supply in Libya and Iraq, citing social pressures in both countries. Protests caused Libyan oil product to fall by 60 percent this month with bombings in Iraq pushing their production to its lowest levels in five months.

Related: Brent Ends Losing Streak On China Data

Concerning Iraq, the IEA’s report stated, “Northern exports are expected to remain constrained indefinitely given the lack of progress between Baghdad and the Kurdistan Regional Government (KRG) over payment and contract terms.”

Keeping prices from skyrocketing is Saudi Arabia’s record high production and the wealth of oil in North America’s shale reserves. In July, non-OPEC oil supply rose by 570,000 barrels a day with forty percent of the growth coming from North America. Most of this growth came from Canada, not the United States.

A combination of North America’s growing production and OPEC’s supply issues may pave the way for additional lost OPEC market share. The IEA commented: "Right now, OPEC's main challenge seems to be less future demand softness than practical difficulties in bringing production to market.”

Strong economic data from China ended a losing streak, causing prices to bounce higher. Heading into the close, WTI was up more than 2.59 percent to $106.08 with Brent up 1.48 percent to $108.26.