The timing of the world oil market’s return to balance is “the big question”, the IEA said in its monthly report, adding that current prices – above United States dollars 45 – would suggest supply falling and strong demand growth.
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Futures were trading lower, then took a sharp leg down after the IEA released its closely watched monthly report.
According to the IEA, 2.4 per cent of global GDP was invested in energy past year, which represents $1.8 trillion, half of which went to fossil fuels – mostly oil and gas – and 17 per cent of which went to renewables – $300 billion. While growth was expected to ease over the next few decades, it’s now slowing at a pace faster than previously thought.
According to The Wall Street Journal, the latest IEA data will “intensify the debate among oil producers later this month in Algiers about whether they should put new limits on their production”. It cut its 2016 demand growth forecast by 100,000 barrels a day, to 1.3 million barrels a day.
Petrol futures were also supported by news BP Plc will conduct repairs this weekend on the large crude distillation unit at its 413,500 barrel per day Whiting, Indiana refinery, cutting production by at least 50 per cent.
Libya’s National Oil Corp said it was lifting force majeure at three ports. That compared with Saudi Arabian production of 12.58 million barrels a day the same month.
The Organization of the Petroleum Exporting Countries has also pointed to a larger surplus next year due to new fields in non-member countries.
Near-record OPEC output, and higher supply from outside, could make it harder for OPEC, led by Saudi Arabia, and rival Russian Federation to come up with steps to support the market.
“When will the world oil market return to balance?”
The steady surge in Saudi output is the result of an adamant Riyadh oil policy against low oil prices.
Some analysts and traders expected oil prices to come under pressure again soon, as crude supplies return from Nigeria and Libya. However, the opposite now seems to be happening.
“Although any damage is reportedly still to be assessed, the reopening of these ports could have the potential to more than double Libyan crude production”. Rigs targeting crude in the USA have had the biggest return to activity since oil began falling two years ago and Kazakhstan’s giant Kashagan field is expected to start output this year, adding to the oversupply.
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USA government data released yesterday showed crude inventories dropped by 599,000 barrels in the week to 9 September, pleasantly surprising analysts who had expected a crude build of 3.8m barrels.
