“The worldwide Energy Agency’s latest estimates for the oil market have been weighing”.
Advertisement
The global Energy Agency is predicting the world oil market will remain oversupplied for at least another year, in a report that injected fresh volatility into oil markets.
“Meanwhile, in the futures markets, the price for long-dated crude oil continues to trade higher than spot crude (i.e. crude for immediate delivery)”.
A slowdown in forecast demand growth and slightly higher non-OPEC supply lowers the 2016 “call” on OPEC by 0.2 mb/d from last month’s Report to 31.1 mb/d.
Brent crude which is a global pricing criterion fell 8.2% this year and dropped 41% in the last 12 months.
This year, the “much maligned Chinese economy is having little, if any, apparent negative impact upon Chinese oil demand growth”, the report said.
An increase in production from Opec member Iran once sanctions are lifted is expected to overshadow the first drop in U.S. oil output since 2008, the IEA added. Brent crude oil front month futures were trading up by 0.40% at $50.06 per barrel, as of then.
With oil prices below the estimated breakeven cost for major USA shale plays, the decline in drilling and completion rates that has been observed since the start of the year is expected to extend well into 2016. Gasoline demand has been particularly strong, suggesting motorists have been encouraged to drive more by lower prices.
China’s factory-gate deflation and less-than-expected consumer inflation added to signs of a slowdown in the world’s No. 2 economy following a slump in imports.
Record output from Iraq pushed supplies from the Organization of Petroleum Exporting Countries higher in September, according to the report. “As China demand goes up, so will production because OPEC and non-OPEC producers would want to take advantage of the rising China demand to stay competitive in the market”, said a Singapore-based trader.
“Non-OPEC supply will probably decrease more steeply than previously anticipated”, said Carsten Fritsch, analyst at Commerzbank in Frankfurt. The Oil & Gas Refining and Marketing – NEC Company has reached a contract with PBF Energy, Inc. for the sale and purchase of its refinery in Torrance, California, a lubricants distribution center at Vernon, products terminals at Vernon and Atwood, and associated California pipelines and other logistics assets, counting facilities at the Southwest terminal.
OPEC production, meanwhile, is expected to surge on gains in Iraqi production and the likely return of Iranian crude to the market.
Advertisement
Declining US oil production will drive the decline in total supplies from nations outside OPEC, the IEA said.
