As a result of the report’s changes to 2016 and 2015 non-OPEC supply forecasts, demand for OPEC crude next year is expected to average 30.84 million bpd – just 20,000 bpd more than OPEC expected previously.
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IEA’s estimates aren’t a big revelation, but makes it harder for oil bulls to claim the market is on the verge of a turnaround, said Todd Garner, managing partner at hedge fund Protec Energy Partners LLC in Boca Raton, Fla.
The group is battling for market share with other oil producers including the United States and last Friday decided against cutting output despite plunging prices, weak global demand and the supply glut. On Friday, Russian’s deputy finance minister issued a stark warning of $40-$60 oil “for the next seven years”, Reuters reported.
In summary, the IEA said the petrochemical demand in all regions is boosting naphtha producers’ margins and profits, who also benefited during November from weakened crude spot prices. Shares in the USA rebounded from one-month lows, though gains were limited amid a lack of positive catalysts and as oil resumed falling.
Companies producing, refining, piping and exploring for oil, along with those that provide them with services, had a market value of about $3.72 trillion as of Friday, compared with $3.96 trillion on December 3, the day before the Organization of Petroleum Exporting Countries’ meeting in Vienna.
However, the call on OPEC for next year was substantially higher, by about 1.6 mb/d, than that for 2015.
Prices have tumbled this month after OPEC failed to impose a ceiling on output.
Tyler Stableford | Getty Images.
But it added that the pace of record global stock-building would slow down next year and the world was very unlikely to run out of storage capacity.
The IEA responded to that decision, saying the “move appears to signal a renewed determination to maximize low-priced OPEC supply and drive out high-cost non-OPEC production – regardless of price”.
Oil futures extended their tumble with little pause yesterday, with crude prices hitting their worst levels since the 2008/9 credit crunch, after the International Energy Agency (IEA) warned that global oversupply could worsen next year.
“There is evidence the Saudi-led strategy is starting to work”, the IEA said.
China’s yuan has also fallen to its lowest in 4-1/2 years on concerns about the country’s slowing economy and expectations of a USA rate hike.
Brent for January settlement slid as much as 35 cents, or 0.9 per cent, to US$39.38 a barrel on the London-based ICE Futures Europe exchange.
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“The oil sector is expected to stay under pressure in the near term…as output from global oil producers is likely to rise further in the future”, Mr Aw added.
