The world is awash with oil having built record stockpiles in recent months and slowing demand growth combined with resilient non-OPEC supply could worsen the glut well into next year, the worldwide Energy Agency (IEA) said on Friday.
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Taking into consideration the addition of Indonesia to its membership, the Organization of the Petroleum Exporting Countries (OPEC) is said to be mulling a 1 million barrels per day (bpd) raise in its production target to 31 million bpd at its December 4 meeting, Bloomberg reports.
OPEC in the report left its 2016 oil demand forecasts unchanged, predicting the world would need 30.82 million bpd of OPEC crude and that global demand would grow by 1.25 million bpd.
OPEC’s report points to a 560,000-bpd supply surplus in the market next year if the group keeps pumping at October’s rate, down from 750,000 bpd indicated in last month’s report.
The low oil prices have had little effect on short-term production growth in Canada’s oilsands, but the IEA forecasts non-OPEC production to drop by 600,000 barrels a day thanks largely to the drop in production from shale oil in the United States.
The last time the market faced a similar glut was in the wake of the financial crisis in early 2009.
That was a contraction of 0.3 days since August, but is still 4.5 days above the five year average.
“The impact of oil’s steep price plunge on end users is unlikely to be repeated and economic conditions are forecast to remain problematic in countries such as China”, the IEA said.
A market share battle between Russian Federation and OPEC oil producers in Europe is intensifying as Iraq has overtaken Saudi Arabia as the second largest seller there and Iran has already lined up buyers for its crude for when sanctions are lifted.
OPEC said refinery margins also fell globally in October, despite it being the peak maintenance season with 8 mb/d of capacity offline, due to these high inventories as well as market expectations of a relatively mild winter. “This would help alleviate the current overhang and support a recovery of crude oil prices in the coming months”, the report said.
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USA crude futures were 80 U.S. cents, or 1.9 per cent, lower at US$42.13.
