IEA Changes View on Oil Glut, Sees Oversupply Persisting in 2017
The surplus in global oil markets will last for longer than previously thought, persisting into late 2017, as demand growth slumps and supply proves resilient, the International Energy Agency said.
World oil stockpiles will continue to accumulate through 2017, a fourth consecutive year of oversupply, according to the IEA. Consumption growth sagged to a two-year low in the third quarter as demand faltered in China and India, while record output from OPEC’s Gulf members is compounding the glut, said the agency, which just last month saw the market returning to equilibrium this year.
“Supply will continue to outpace demand at least through the first half of next year,” the Paris-based adviser said in its monthly report. “As for the market’s return to balance — it looks like we may have to wait a while longer.”
Almost two years after the Organization of Petroleum Exporting Countries set a strategy to eliminate the global oil glut by pressuring rivals with lower prices, markets continue to struggle with excess supply and crude remains capped near $50 a barrel. The organization plans to hold informal talks with competitor Russia in Algiers later this month, fanning speculation the producers may agree on an output cap to shore up prices.
The IEA trimmed projections for global oil demand next year by 200,000 barrels a day to 97.3 million a day. It reduced growth estimates for this year by 100,000 barrels a day to 1.3 million a day, citing a “dramatic deceleration in China and India” this quarter coupled with “vanishing growth” in developed economies.
“Recent pillars of demand growth — China and India — are wobbling,” said the IEA, which counsels 29 nations on energy policy. “The stimulus from cheaper fuel is fading. Refiners are clearly losing their appetite for more crude oil.”
Supplies outside OPEC will rebound next year after this year’s sharp decline, rising by 380,000 barrels a day, according to the report. The estimate is “marginally” higher than last month, driven by the stronger-than-expected performance of Norway and Russia. U.S. shale-oil production will begin to recover in the second half of 2017, it said.
Saudis on Top
Production from OPEC’s 14 members rose slightly last month as Gulf countries Saudi Arabia, Kuwait and the United Arab Emirates pumped at or near record levels and as Iraq pushed output higher, the IEA said. Saudi Arabia has overtaken the U.S. as the world’s largest oil producer — when non-crude forms like natural-gas liquids are included — a ranking America held since April 2014. Saudi crude output was 10.6 million barrels a day in August.
The combination of faltering demand and increased OPEC output pushed oil inventories in developed nations to a new record in July, at 3.1 billion barrels.“Demand growth is slowing and supply is rising,” the agency said. “Consequently, stocks of oil in OECD countries are swelling to levels never seen before.”