Prices slid 7.4% for the week.
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But it cautions that: “The market’s ability to absorb that oversupply is unlikely to last”.
In the second quarter of 2015, the world’s supply of oil was 96.39 million barrels a day, outstripping demand of 93.13 million barrels a day, according to the IEA’s Oil Market Report, which described the world oil market as “massively oversupplied”. Baker Hughes (NYSE:BHI) reported that the number of rigs drilling for oil in the USA increased the past week, potentially exacerbating the glut.
The IEA, which monitors energy market trends for the world’s richest nations, said global oil supply has surged an additional 550,000 barrels a day in June, rising in both OPEC and non-OPEC countries.
The IEA notes that a slowdown in demand this year comes as supplies from the Middle East, Russian Federation and the US are at or near a peak.
“World events could further rock the market, the IEA said”.
Core members of the Organization of the Petroleum Exporting Countries have been pumping strongly for most of the a year ago in an attempt to regain market share. Oil was trading at $53.2 per barrel on Friday morning. In 2016, Commerzbank expects Brent to average $73 a barrel, down from its prior forecast of $78 a barrel. If the talks stall or are delayed significantly, Iran will be unable to get sanctions relief and ramp up its oil exports in coming months.
Concerns about Greece’s economy and a selloff in the Chinese stock market also weighed on oil prices this week, as traders tried to determine whether either situation could lead to weaker economic growth and lower oil demand.
Gasolineslid 2.86 cents, or 1.4%, to $2.0165 a gallon.
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Kloza thinks what’s happening to prices now – wild swings in crude prices that are a major factor in the price at the pumps and daily changes at the pumps – are a “dress rehearsal” for the fall when consumer demand drops markedly.
