IEA Sees Global Oil Glut Worsening, OPEC Deal Unlikely

IEA Sees Global Oil Glut Worsening, OPEC Deal Unlikely
The world will store unwanted oil for most of 2016 as declines in US output take time while OPEC is unlikely to cut a deal with other producers to reduce output, the IEA says.

Reuters

LONDON, Feb 9 (Reuters) – The world will store unwanted oil for most of 2016 as declines in U.S. output take time and OPEC is unlikely to cut a deal with other producers to reduce ballooning output, the International Energy Agency said.

The agency, which coordinates energy policies of industrialised countries, said that while it did not believe oil prices could follow some of the most extreme forecasts and fall to as low as $10 per barrel, it was equally hard to see how they could rise significantly from current levels.

The Paris-based IEA trimmed its forecast for 2016 oil demand growth, which now stands at 1.17 million barrels per day (bpd) following a five-year high of 1.6 million in 2015.

It cut its call on OPEC crude for 2016 by 100,000 bpd to 31.7 million bpd. That figure is much lower than OPEC's January output of 32.63 million bpd.

"Persistent speculation about a deal between OPEC and leading non-OPEC producers to cut output appears to be just that: speculation. It is OPEC's business whether or not it makes output cuts either alone or in concert with other producers but the likelihood of coordinated cuts is very low," the IEA said.

Oil prices collapsed over the past 18 months to below $30 a barrel from as high as $115 as OPEC opened its taps to drive higher-cost producers such as U.S. shale companies out of the market.

Low oil prices have spurred global demand but it was not enough to absorb all crude produced. As a result, unwanted oil went into storage, leading to record global stockpiles of over 3 billion barrels.

U.S. shale oil output has started to decline because of low prices and OPEC has said it sees the market rebalancing sometime later in 2016 when demand finally meets supply.

But the IEA said supply may still exceed demand throughout the whole of 2016 and added it saw non-OPEC output falling by just 0.6 million bpd in 2016.

"The number could be higher of course and many senior international oil company figures have said so but there is a lingering feeling that the big fall-off in production from U.S. shale producers is taking an awful long time to happen. Perhaps resilience still has some way to go," the IEA said.

The agency also said it saw the dollar remaining strong as it benefits from its safe-haven status, meaning more downward pressure on oil prices.

With weaker global oil demand, likely new gains in Iraqi, Iranian and Saudi output, low chances of an OPEC deal, resilient U.S. production and a strong dollar - the IEA said the global oil glut was only poised to worsen.

It said that even if OPEC production remained flat, global stocks would build by 2 million bpd in the first quarter, followed by a 1.5-million-bpd build in the second quarter.

"Supply and demand data for the second half of the year suggests more stock building, this time by 0.3 million bpd. If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term. In these conditions the short-term risk to the downside has increased."

(Reporting by Dmitry Zhdannikov; Editing by Dale Hudson and Jason Neely)

Copyright 2016 Thomson Reuters. Click for Restrictions.

WHAT DO YOU THINK?

Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Rich | Feb. 9, 2016
I think the U.S. needs to STOP importing OPEC Oil. If you kick a tiger in the butt, you better have a plan for its teeth!!


Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE



Most Popular Articles

From the Career Center
Jobs that may interest you
Operations and Business Development Manager
Expertise: Business Development|Helicopter Pilot / Operations|Laboratory Ops / Tech|ROV Ops / Tech|Sales
Location: Corpus Christi, TX
 
Process Engineer (Professional Services Group)
Expertise: Chemical Engineering|Helicopter Pilot / Operations|Laboratory Ops / Tech|Legal|Mechanic|Process Engineer|Project Engineer|Project Management|ROV Ops / Tech
Location: Bishop, TX
 
Senior Project Manager
Expertise: Project Management
Location: California, United States, CA
 
search for more jobs

Brent Crude Oil : $50.61/BBL 4.17%
Light Crude Oil : $49.88/BBL 4.24%
Natural Gas : $2.86/MMBtu 1.95%
Updated in last 24 hours