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. The Australian dollar declined sharply against United States dollar on Tuesday as falling oil prices and reduced demand for commodity-related currency overshadowed positive economic data from China, helping dollar gain strength against the Aussie.
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OPEC s members and Russian Federation are due to convene an informal meeting in Algeria this month but investors hopes that they will agree to limit production have dimmed in recent days. The increase by Iran, which has been recovering from years of economic sanctions following the global agreement limiting its nuclear program, has been swifter than the IEA expected.
Oil prices plunged more than 2 percent on Tuesday after the IEA said that global oil demand is slowing. The 100,000 barrel per day downward revision for the whole of 2016 comes as the IEA sees third quarter demand 300,000 barrels per day lower than its previous forecast.
The agency called the supply side “confounding”.
Oil prices have halved over the past two years due to a glut of production while global gas prices have made a similar retreat.
Oil climbed as much as 16 per cent in the weeks after Opec announced talks in the Algerian capital, extending a rebound from a four-month low.
Opec countries produced a combined 33.47 million bpd in August, up 930,000 bpd from August 2015.
Producers Saudi Arabia, Kuwait, the United Arab Emirates and Iraq are all at, or near all-time highs, the report said. Two directors backed by Icahn are now on the company’s board, and he has pushed Freeport-McMoRan to spin off its oil and gas business so it can focus on copper mining. The US had held the spot since April 2014. The rapid growth of non-OPEC production, especially since 2013, has led to OPEC producers losing market share.
Iran, meanwhile, has been “swift” to ramp up its production after the lifting in January of years of nuclear-linked sanctions.
“It seems the situation has deteriorated strongly in the eyes of OPEC as well as the IEA”, Commerzbank head of commodities strategy Eugen Weinberg said. Supply will continue to outpace demand through at least the first half of 2017.
As a effect of these developments the IEA changed its view on the oil glut saying that instead of seeing the market balance this year, world oil stockpiles will now continue to accumulate for a fourth year through 2017. Both Opec and the International Energy Agency revised their forecasts for 2017 this week, with the IEA now warning that the glut will persist through next year.
“The IEA data is also suggesting that an OPEC “freeze” will not be enough to rebalance the market in 2017″, he said in a note to investors. OPEC’s newest member, Ghana, has brought a new field into production this month, and Libya is hoping to recoup some of its lost production, so it is unlikely we will see a freeze in OPEC production.
Thirty-year US yields held just below 2-1/2-month highs at 2.47 percent on Tuesday.
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Crude oil was down 2.61% to $45.08 per barrel while Brent crude declined 2.15% to $47.28 per barrel this afternoon.
