Just as global oil demand growth was showing signs of a slowdown, the global oil supply inched up in November, according to the IEA, to reach 96.9 mb/d “on slightly higher OPEC crude output”.
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While non-OPEC oil supply was estimated to grow by 1.00 mb/d in 2015 to average 57.51 mb/d, it forecast a contraction in non-OPEC oil supply in 2016.
It was a fifth straight week of declines that left their net long position in US crude at 46,919 contracts, the lowest since the CFTC created the managed money category for oil in 2009.
Opec warned that its “oil demand forecast for 2016 is subject to considerable uncertainties, depending on the pace of economic growth, development of oil prices, and weather conditions, as well as the impact of substitution and energy policy changes”.
Supply outside OPEC is expected to decline by 380,000 barrels per day (bpd) in 2016, the report said, as output falls in regions such as the United States and former Soviet Union. In fact, the IEA said that in November, OPEC accounted for the “lion’s share of the growth” in global oil supplies. The draw halted a 10-week streak of supply increases, as crude inventories nationwide approached near capacity. The combination of rising consumption and an expansion in storage facilities means the world won’t run out of space to store the surplus crude, the agency said.
But the agency adds there is “evidence the Saudi-led strategy is starting to work”, referring to OPEC’s decision to maintain output to defend market share. “Oil below $50 is clearly driving out non-OPEC supply”. The group, which gave up individual production quotas several years ago in favor of an aggregate production ceiling, appeared to have largely done away with those restraints, as well.
This outcome happened on Thursday a few days after Federal government proposed $38 per barrel as the oil benchmark price for the 2016 budget, down from $53 this year. Growth in global oil demand is set to slow next year amid an ” … With 95 percent of its income from oil, Venezuela is witnessing its worst recession since the 1940s, and the economy is expected to shrink by 10 percent this year.
Sell-offs were triggered ahead by the OPEC monthly report, as per which the cartel’s oil production rose in November by 230000 to 31.7 mn barrels per day.
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As one of the world’s leading crude producers, but not an OPEC member, Russia’s involvement in potential action to support prices has been the source of much speculation since prices started tumbling in the second half of 2014. ConocoPhillips will reduce capital spending by 25 percent next year to $7.7 billion to protect the highest dividend yield among major US oil producers, the Houston-based company said Thursday.
