Get ready for a new oil low.
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“There are some signs that foreign investors are more optimistic about China’s efforts to arrest the stock slide”, said Bernard Aw, market strategist at IG Markets.
But it cautions that: “The market’s ability to absorb that oversupply is unlikely to last. Onshore storage space is limited”, it said, adding: “Something has to give”.
A drop in demand for oil is forecast for 2016, which is likely to push prices down further, the global Energy Agency (IEA) is predicting. Next year’s demand will average 95.2 million barrels a day.
That means the need for OPEC’s oil will stand at 30.3 million bpd next year, up 1 million bpd on 2015, but still a whopping 1.4 million bpd below current OPEC production.
They announced there is no overall creation increase out the Organization of Petroleum Exporting Countries year after year for very 1st time ever since 2008.
Reuters reports today that the price per barrel of Brent crude oil is up 7 cents at $58.68, but that so far this month the global benchmark has lost more than 7 percent.
“The rebalancing that began when oil markets set off on an initial 60 percent price drop a year ago has yet to run its course”, it said.
U.S. oil production has also soared in recent years, as fracking – or the process of extracting oil from shale rock by injecting fluids into the ground – has revolutionised oil production in the country.
The IEA report comes in a bad week for crude markets. “This is not only because of the psychological impact on the market due to an anticipated production boost but also because of Iran’s 36 to 37 millions barrels of stored liquids in Iranian floating storages that could be released immediately”.
World oil demand growth appears to have peaked in the first quarter at 1.8 mb/d and will continue to ease throughout the rest of 2015 and into 2016 as temporary support fades.
Growth in non-OPEC oil supply “is expected to grind to a halt in 2016 as lower oil prices and spending cuts take a toll”, the IEA said in its monthly oil report.
That forecast is “underpinned by 6-to7 percent GDP projections and very much depend on the economy not under-performing, hence the risks of much lower demand are not insubstantial”, the IEA said.
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Meanwhile, negotiations between Iran and 6 major powers on Tuesday’s nuclear ambitions in Tehran were extended until Friday.
