The oil market is “stretched to the limit” despite the fact that OPEC+ agreed to ramp up production following their meeting last month, according to the International Energy Agency.

The IEA said that the increased supply from Saudi Arabia, its Gulf allies and Russia is “very welcome,” given the series of outages reported around the world.

Oil prices plunged by around 6 percent on Wednesday on news that Libya’s oil export terminals were set to come back online. The IEA said that while the situation was improving “we cannot know if stability will return.”

Indeed, the sudden and unexpected outage from the North African country over the past few weeks illustrates the degree of risk facing the oil market, which is to say, if oil prices can swing by 6 percent on a given day because of the specific events in one rather unstable country, the market is pretty tight and pretty vulnerable.

A few other outages are adding to the tightness. Syncrude Canada suffered a 360,000-bpd outage in June, which was thought to last through July but could stretch into September or even October. A lesser-known 360,000-bpd decline from the North Sea was reported in May, a drop off that could last through the summer due to field maintenance. Also, Brazil’s production growth has been disappointing this year, and because Brazil is one of the most important non-OPEC countries after the U.S. in terms of expected output growth, less-than-stellar growth numbers leaves the market tighter than expected.

Related: OPEC Won’t Take Additional Action As Oil Prices Rise

Saudi Arabia and Russia ramped up supply in June, adding roughly 500,000 bpd together. But the outages in Libya, Canada, the North Sea, Brazil, Angola and Kazakhstan offset the gains from the two largest producers in the OPEC+ coalition.

The U.S. campaign to isolate Iranian oil exports is already starting to have an effect, even though the deadline for countries to cut their purchases of oil from Iran is in November. Iran’s oil exports fell by 230,000 bpd in June from a month earlier, and European refiners cut their purchases by 50 percent. The real danger to the oil market is if a large portion of Iranian supply is shut in this year.

“This vulnerability currently underpins oil prices and seems likely to continue doing so,” the IEA said.

“Some of these supply issues are likely to be resolved, but the large number of disruptions reminds us of the pressure on global oil supply,” the IEA wrote in its report. “This will become an even bigger issue as rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit.”

The IEA says there are only three countries from OPEC that really hold spare capacity that is readily available. Saudi Arabia, Kuwait and the UAE had 2.1 mb/d of spare capacity in June. But because those countries are increasing output – a “very welcome” event – it will trim spare capacity down to just 1.6 mb/d in July.

“In 4Q18, US sanctions on Iran are expected to hit hard and Venezuelan capacity may spiral lower. To help compensate for the further unplanned declines and limit stock draws, Saudi Arabia could ramp up even more which would cut its spare capacity to an unprecedented level below 1 mb/d,” the IEA said.

“We see no sign of higher production from elsewhere that might ease fears of market tightness.”

On the demand side of the equation, higher prices are starting to be felt. Oil demand started the year at a blistering pace, growing at a 2-million-barrel-per-day rate in the first quarter, year-on-year. That has slowed dramatically. The IEA acknowledged the threat to the demand forecast from high prices, but did not alter its forecast for the full year. “[A]lthough there are emerging signs of reduced economic confidence, and consumers are unhappy at higher prices, we retain our view that growth in 2018 will be 1.4 mb/d, and about the same next year.”

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Still, the IEA noted several risk factors to this forecast. Demand growth at that level is predicated on strong economic growth, and the agency is assuming global GDP growth at 3.9 percent. The global trade war pursued by the Trump administration could upend that rate of expansion. “[I]ncreasing trade tensions could have a direct negative impact on economic growth, bunker fuel demand and diesel used by trucks for the transportation of traded goods,” the IEA said. “Tariffs could also affect the trade of oil and petrochemical feedstocks and products. Several countries are also feeling the pain of higher oil prices, particularly so when combined with currency depreciation versus the US dollar.” The agency expects Brent to average $73.50 per barrel this year and $73.60 in 2019.

With that said, supply risks are dominating market psychology right now. Oil prices crashed on Wednesday on news that Libya supply was coming back. But on Thursday, oil rebounded a bit after the IEA warned of market tightness and low spare capacity.

“The market’s move lower yesterday seemed quite extreme. It ignored the biggest U.S. crude drawdown since September 2016, and it’s recovering on that,” Warren Patterson, a commodities strategist at ING, told the Wall Street Journal.

By Nick Cunningham of Oilprice.com

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