However the diversification of the supply glut meant that “brimming crude oil stocks offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions”, the IEA said on Friday.
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In its short-term market report, the U.S. Energy Information Administration said it expected the balance between supply and demand to move closer to equilibrium starting in 2016.
The rationale behind such a strategy is that the group wants to maintain its 40 percent share of the market in the face of rivals, with competition from USA shale oil producers a particular bugbear.
Birol said the Middle East, which already provides about a third of the world’s oil, could see exports equate to more than two thirds of total supply, particularly in a sustained environment of $50 oil prices. The pace of gains slowed to 1.6 MMbopd in the third quarter, from 2.3 MMbopd in the second, although growth remained “significantly above the historical average”. There are signs that a few fuel-storage depots in the eastern hemisphere have been filled to capacity, it said.
OPEC is trying to convince the world that demand will be better next year and beyond, but right now the world is facing a “heck of a glut”, and that glut will persist a long time at present over-production level.
And here is where the IEA must certainly be wrong – another five years of low oil prices would fully decimate the necessary capital expenditures required to develop new oil sources, collapsing supply.
The IEA report forecasts USA tight oil production, which has been the driver of non-OPEC growth, will decline by 600,000 barrels next year. The nation’s crude would typically compete with that from Saudi Arabia, Iraq and Russian Federation, the IEA said. Any major declines in US shale production could provide signals that OPEC’s strategy is prevailing.
Opec has forecast that demand for its crude next year will average about 30.8m b/d as demand rises and output outside the cartel slips.
Indonesia’s re-entry into OPEC is expected to be formally announced at the December 4 meeting.
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Separately, shipping data showed tankers with nearly 20 million barrels of Iraqi oil due to sail to the United States in November, almost 40% above the amount booked to arrive in October.
