European benchmark Brent oil for January delivery shed 38 cents to US$39.73 a barrel in London. As companies make further spending cuts in reaction to sub-$50/bbl oil, the impact on supplies – both from non-OPEC and OPEC – will be even more pronounced in the longer term.
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As a result, crude prices are expected to remain stubbornly low amid a glut of oversupply on global energy markets.
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Oil prices fell to a fresh-multi year low Wednesday as worries about a longstanding supply glut offset news of a surprise decline in U.S. petroleum inventories.
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During the meeting, OPEC members failed to agree an oil production ceiling as Iran pledged to boost its output by one million barrels per day in 2016.
The report also raised non-OPEC production growth estimates by 280,000 bpd to 1 million bpd, based on U.S., U.K., Brazil, Russia, and China production data.
Producers are counting on global consumers to ratchet up demand for crude as they take advantage of low retail prices for gasoline and diesel.
OPEC production rose by 230,000 barrels a day last month, according to secondary sources that track OPEC’s production levels.
Furthermore, early indicators for the current quarter were that growth in demand will ease to 1.3 m/bd from a year earlier after reaching a peak last quarter at 2.2 mb/d, the IEA added. Lower prices are clearly taking a toll on non-OPEC supply, with annual growth shrinking below 0.3 mb/d in November from 2.2 mb/d at the start of the year.
After the “tremendous” growth of 2.23 million barrels per day last year, the group now expects growth this year to have been a “much slower” 1 million – but up from its previous projection of 280,000 barrels.
In early trading on Friday, U.S. crude fell 84 cents to $35.92 a barrel on the New York Mercantile Exchange.
Analysts are blaming rising oil production, largely by OPEC member states, for the falling prices.
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OPEC in November 2014 vowed to keep production steady despite the rise of USA shale oil production, maintaining market demand would eventually return.
