The price of oil could be set for another substantial drop following news from one of the oil industry’s most respected organisations that the global supply-and-demand problem will take longer to clear than had been previously expected.
Advertisement
But recent trends in demand, together with the fact Opec has raised its production by nearly as much as non-Opec producers have cut, means that the move towards balance looks like it is reversing, the IEA said.
The IEA trimmed projections for global oil demand next year by 200,000 barrels a day to 97.3 million a day.
Nearly two years after the Organization of Petroleum Exporting Countries set a strategy to eliminate the global oil glut by pressuring rivals with lower prices, markets continue to struggle with excess supply and crude remains capped near $50 a barrel. Kuwait and the United Arab Emirates hit record levels of production, and Iran had higher output than any time since the lifting of sanctions.
“Recent pillars of demand growth – China and India – are wobbling”, the agency said, adding that increases in Europe had “vanished” and that USA “momentum” toward higher consumption had slowed.
Oil will remain in oversupply until at least the end of the first half of 2017, the IEA argues. Brent crude, the benchmark for worldwide oil prices, slid $1.22, or 2.5 percent, to $47.10 a barrel in London.
Production declines will accelerate in the final four months of the year, Sun said, with monthly crude output averaging 16.25 million tons, while oil imports average 32 million tons. Absent meaningful changes in crude oil and petroleum product price differentials, however, refinery profits will likely display smaller variability across different locations than occurred between 2012 and 2014.
“The idea of an oil production freeze makes even less sense if demand falls apart while USA monetary stimulus is being removed at the same time”, said David Thompson, executive vice-president at Powerhouse, a commodities-focused brokerage in Washington.
Brent crude prices fell to $47.40 a barrel, while US West Texas Intermediate futures declined by $1.03 to $45.26 a barrel.
As recently as last month, the agency had expected the market to return to equilibrium this year.
Oil and gas companies are pulling the stock market lower as energy prices sink.
The commodity rallied for most of August on hopes for a production limitation deal at a meeting between OPEC and Russian Federation this month, but it has taken a beating in recent weeks as traders grow cynical that the Algiers gathering will end in success.
LONDON, Sept 14 Global upstream oil and gas investments are expected to plummet 24 percent this year, with little signs of improvement for 2017, the International Energy Agency (IEA) said on Wednesday.
Advertisement
What’s confounding the analysts is that even with the low prices, more crude oil than ever is still coming up out of the ground in parts of the world. All in all, the adjustment in the demand-supply balance anticipated by the IEA has weighed on oil prices.
