Crude oil prices hit fresh seven-year lows on Friday as the International Energy Agency (IEA) warned global oversupply could worsen in the new year.
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Gorry said he expected a slow rebalancing of the market towards the end of next year, with production remaining stubbornly high despite low benchmark prices.
Soaring output from OPEC member Iraq has been a large contributor to that overhang, with production there doubling over the past decade to around 4.3 million barrels per day, more than enough to meet all of India’s daily demand.
In its December oil market report, released on Friday, the Paris-based International Energy Agency (IEA) projected global demand growth in 2016 to slow considerably, widening the gulf in the supply-demand imbalance worldwide.
Crude oil futures also fell, with ICE Brent averaging $45.93/b and Nymex WTI $42.92/b.
IEA’s estimates aren’t a big revelation, but makes it harder for oil bulls to claim the market is on the verge of a turnaround, according to Todd Garner, managing partner at hedge fund Protec Energy Partners in Boca Raton, Florida.
At its meeting on Friday, OPEC members chose to continue pumping near-record levels of oil to maintain market share against non-OPEC members like Russian Federation and U.S.in an already oversupplied market. Oil rig counts now sit at 545 or the equivalent to levels seen in 2011 when crude prices bounced between $70 and $90.
Gasoline’s premium to heating oil widened as the heating oil contract HOc1 slumped 6 percent to near 7-year lows while gasoline RBc1 settled flat. The lower price will continue to force capital project deferment and pressure USA shale producers to take production offline.
Oil futures tumbled further with OPEC confirming on Thursday its production for November stood at 31.7m barrels per day, well above its published quota cap of 30m bpd.
“OPEC’s output in November indicates that the global supply glut is exacerbating”, Will Yun, a commodities analyst at Hyundai Futures Corp in Seoul, said by phone. OPEC’s decision last week “appears to signal a renewed determination to maximize low-priced OPEC supply and drive out high-cost non-OPEC production-regardless of price”. We expect a notable economic slowdown in Saudi Arabia, where we forecast GDP growth falling to 1.9% in 2016 (2015: 4%), Qatar (2016 GDP growth: 3.7%; 2015: 4.3%) and Oman (2016: 2.7%; 2015: 3.4%). “There is unlikely to be any kind of “happy ending” for oil prices this year”. “So we believe the pick-up in price will come in late 2016”.
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The Organization of the Petroleum Exporting Countries in a report also forecast supply from non-member countries will fall more sharply next year, which would suggest its strategy, reaffirmed last week of defending market share, is working.
