Stock markets worldwide tumbled on Friday, Brent crude oil prices fell to seven-year lows and China’s yuan currency sank on risk aversion ahead of a widely anticipated USA interest rate increase next week and worries over economic growth.
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Supply outside OPEC is expected to decline by 380,000 barrels per day (bpd) in 2016, the report said, as output falls in regions such as the United States and former Soviet Union.
The report found USA light tight oil – or shale oil – production could fall by 600,000 barrels a day next year. “I think 2016 will be a year where we will have a lower price environment”, he told The Globe and Mail on the sidelines of the Paris climate summit.
USA weather forecasts call for warmer-than-normal temperatures through Christmas that would curb heating demand, boosting US gasoline futures higher than heating oil prices in December for the first time in at least five years.
Record production in Iraq and higher supplies from Kuwait sent OPEC’s output to 31.73 mb/d in November it said. For 2016, it expects consumption to grow by 1.2-million barrels a day, not almost enough to sop up the excess in production and reduce inventories.
Brent crude LCOc1 was down 4.48 percent at $37.95 a barrel after hitting $37.36, its lowest since December 2008. “Non-OPEC supply held at 58.5 mb/d in November, but annual growth slowed to below 300 kb/d from 2.2 mb/d at the start of 2015”.
The IEA says “concerns about reaching storage capacity limits appear to be overblown”.
“There is evidence that the Saudi-led strategy is starting to work”, the IEA said, referring to the producer group’s decision to maintain high output to safeguard market share.
U.S. Treasury debt prices surged on safe-haven demand after the drops in oil prices and equities.
In its latest monthly oil market report, Opec said low prices will drive strong global demand in 2016, which is estimated to be around 94.13 million bpd, up 1.25 million bpd from this year’s 92.88 million bpd, that was an increase of 1.53 million bpd over last year. Correspondent Grace Pascoe reports the warning from the International Energy Agency comes after a bad week for markets. “Last time the yuan fell like this, it caused a jolt for markets and anyone exporting out to China, like the auto makers and luxury brands, will feel the pain from a weaker yuan”, Jasper Lawler, market analyst at CMC, said.
OPEC production rose by 230,000 barrels a day last month, according to secondary sources that track OPEC’s production levels. Those yields hit 2.148 per cent, their lowest in over a week, while 30-year yields hit a more than six-week low of 2.886 per cent.
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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”, Aw added.
