The oil market dragged much of the stock market down. Is it possible to predict the oil market at all?
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The International Energy Agency said a sharp slowdown in global oil demand growth, coupled with ballooning inventories and rising supply, mean the crude market will be oversupplied at least through the first six months of 2017.
Gasoline and distillate futures fell more than 2 percent each. Regarding the outlook, IEA’s senior oil economist, Matt Parry said: “both Chinese and European oil demand growth have all but vanished by 3Q16”.
Crude oil prices are also under pressure following EIA’s report of rising production volumes and declining demand.
Gasoline output was down palpably to 9.9 million bpd in the seven days to September 9, from 10.2 million bpd in the week before, signaling an expected reduction in fuel supply following Labor Day.
The fall in crude inventories is against analysts expectations of an increase of 3.8 million barrels. NOC Chairman Mustafa Sanalla said Libyan production could be raised to 600,000 barrels per day (bpd) from about 290,000 bpd within a month. Almost half of this year’s over-production, but still adding over 3/4 of a million barrels a day to global oil stockpiles. The mixed data are expected to add to recent oil market volatility in the run up to the unscheduled OPEC meeting at the end of the month.
Meanwhile, OPEC now predicts that production from outside the group will rise in 2017, compared with a previous estimate for a decline, mainly due to new production from Kashagan, it said in its monthly report. Almost all of this increase will be from the Kashagan oilfield in Kazakhstan, which will produce 360,000 barrels of oil a day once it begins production in October.
Overnight, oil prices dropped about 3% after the U.S. Energy Information Administration data showed total supplies of crude oil and refined products grew by six million barrels in the week ended September 9 to 1.4 billion barrels, near the record high reached a few weeks ago.
Oil held below $44 a barrel amid speculation the global crude glut will expand as OPEC members Libya and Nigeria prepare to boost exports within weeks. Declining oil demand during the ongoing third quarter emerged as the main reason behind the slashing of the demand forecast (read: Should You Buy Oil ETFs Ahead of the OPEC Meet?). That drops the daily oversupply to 760,000 barrels, increasing the global oil glut. This is a trend that could continue in the short to medium-term as US oil and gas shale companies drive down production costs.
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The IEA reported global oil demand for 2015 at 94.7 million barrels a day.
