USA output growth has began to shrink and low oil prices have spurred demand but still not enough to help clear the glut.
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“There is evidence the Saudi-led strategy is beginning to work”, said the IEA, adding that it expects non-OPEC supplies to drop by 600,000 barrels per day next year owing to a drop in oil production from North American shale rock.
French automaker Renault (Xetra: 893113 – news) lost 5.3 percent despite saying it had reached an agreement with its alliance partner Nissan and the Paris government to defuse tensions sparked by France raising its stake in the automaker.
But strength in the USA dollar, resilient US production and a continuing global supply glut are also among the key reasons why oil prices continue to fall, he said. As OPEC members scramble hard to find new markets for its crude oil, Indonesia is slowly but steadily emerging as one of the hottest energy markets in Asia.
The IEA said demand in the current quarter was growing by 1.3 million barrels a day, down from 2.2 million barrels in the previous quarter.
Brent futures declined as much as 2.1 per cent for a sixth consecutive loss.
The report highlighted that OPEC production increased by 230,100 bpd (barrels per day) to 31.7 MMbpd (million barrels per day) in November 2015, as compared to production in October 2015.
After a marathon session last week, Opec dumped its earlier production target of 30 million bpd and decided continue its policy of not constraining output.
Crude prices have been barreling toward Great Recession-era lows since the Organization of Petroleum Exporting Countries’ gathering in Vienna last week, when the cartel made a decision to scrap its longstanding output ceiling.
USA crude futures were at $36.39 per barrel, down 37 cents. “Oil below $50 is clearly driving out non-OPEC supply”.
With extra barrels coming from OPEC and no sizeable increase in demand for OPEC crude, the report points to a 860,000-bpd supply surplus next year if the group keeps pumping at November’s rate, up from 560,000 bpd indicated in last month’s report.
“As such, US$20 per barrel is not our baseline scenario and it is quite unlikely that the market will set the oil price to be at US$20 per barrel”, he told Bernama.
The IEA, which advises developed nations on energy, also said in its monthly report that demand growth was starting to slow.
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The International Energy Agency (IEA) said OPEC’s annual revenue may fall to 550 billion USA dollars from an average of more than 1 trillion US dollars in the past five years.
