The global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency.
The Organization of Petroleum Exporting Countries, by effectively dropping production limits at its Dec. 4 meeting, is displaying hardened resolve to maintain sales volumes even as prices fall in an oversupplied market, the agency said Friday in its monthly report. While its policy is hitting rivals, triggering the steepest drop in non-OPEC supply since 1992, world oil inventories will likely swell further once Iran restores exports on the completion of a deal to lift sanctions, it said.
Oil slumped to a six-year low below $40 a barrel in London after OPEC, which controls about 40 percent of world supply, said it would keep pumping in excess of its old production limit. Saudi Arabia, the group’s most powerful member, has steered its strategy to pressure rivals in the U.S. with lower prices.
“As inventories continue to swell into 2016, there will still be a lot of oil weighing on the market,” said the Paris-based agency, which advises 29 nations on energy policy. OPEC’s decision last week “appears to signal a renewed determination to maximize low-cost OPEC supply and drive out high-cost non-OPEC production — regardless of price.”
Abandoning output targets doesn’t mean OPEC is about to further open the taps, as its biggest members — Saudi Arabia and Iraq — are already pumping near record levels, the agency said. The group probably won’t bolster output until Iran completes an agreement on its nuclear program that would lift sanctions on crude exports, the IEA predicted. Iran’s return will probably help to swell oil inventories by an “impressive” 300 million barrels, the agency said.
The accumulation of the surplus will actually slow next year to about half the pace observed in 2015 as non-OPEC supply wilts and demand remains strong enough to absorb some of the excess. The combination of rising consumption and an expansion in storage facilities means the world won’t run out of space to store the surplus crude, the agency said.
“There is evidence the Saudi-led strategy is starting to work,” the agency said. “Oil below $50 is clearly driving out non-OPEC supply.” Production from outside OPEC will contract by 600,000 barrels a day next year, compared with a surge of 2.4 million a day in 2014, the IEA predicted.
Global oil demand growth will slow to 1.2 million barrels a day in 2016, down from a five-year peak of 1.8 million reached this year, as the boost from cheap fuel prices wears off, the agency said. The agency’s 2016 estimates of demand and supply are unchanged from last month’s report.
Production from OPEC’s 12 members rose by 50,000 barrels a day to 31.73 million a day in November, the highest in two months, the agency said. That’s about 400,000 a day more than the average required from the group next year.
Oil Prices News: Oil Gains Following Drops in US Crude Inventories
Oil Prices Gain Following Drops in US Crude Inventories and OPEC High Compliance Level
Global oil prices extended their 2 percent gains on Thursday after data showed U.S crude oil inventories declined last week.
The price of Brent crude oil, against which Nigerian oil is measured, gained 0.2 percent or 7 cents to $43.39 a barrel as at 12:10 pm Nigerian time. While the U.S. West Texas Intermediate (WTI) crude appreciated by 8 cent or 0.2 percent to $41.12 barrels.
Oil prices extended their three days gain after the American Petroleum Institute said the U.S crude inventories declined by 5.4 million barrels in the week ended October 9.
The report released after the market closed on Wednesday revealed that distillate stockpiles, which include diesel and heating oil, declined by 3.9 million barrels. Those stated drawdowns almost double analysts’ projections for the week.
“Much of the fall is due to the effects of Hurricane Delta shuttering U.S. production in the Gulf of Mexico, and as such, will be a transitory effect,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.
“Therefore, I am not getting too excited that a turn of direction is upon markets, although both contracts are approaching important technical resistance regions.”
Also, the report that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, referred to as OPEC+ attained 102 percent compliance level with their oil production cuts agreements bolstered global oil outlook. Suggesting that demands for the commodity are likely not growing and could drag down prices in few weeks, especially when one factor in the reopening of Libya’s Sharara oil field, workers returning to operation in Norway and the Gulf of Mexico.
Oil Prices Gain on Tuesday Despite Expected Surge in Global Oil Supplies
Oil Prices Rise Despite Expected Surge in Global Oil Supplies
Oil prices gained on Tuesday despite Libya opening Sharara oil field for production, labour in Norway reaching an agreement with oil firms to return back to work and oil workers in the U.S returning to the Gulf of Mexico region after the Hurrican Delta.
Brent crude oil, against which Nigerian oil price is measured, gained 1.77 percent to $42.46 per barrel as at 11:15 am Nigerian time on Tuesday.
While the US West Texas Intermediate (WTI) crude oil gained 2 percent to close at $40.22 per barrel.
The improvement in prices was after oil prices plunged as much as 3 percent on Monday following a resolution reached by Libyan rebels and government to commence oil production at the nation’s largest oil field, Sharara Oil Field.
This coupled with labour agreement with oil firms in Norway was expected to boost global oil supplies and eventually weighed on prices and disrupt OPEC+ production cuts strategy.
However, prices surged after Nancy Pelosi said she would commence talks on $1.8 trillion stimulus package following President Trump’s return to the White House after he was rushed to hospital following a positive COVID-19 test.
Joe Biden Win Could Boost Oil Prices, Says Goldman Sachs
Oil Prices to Surge Once Joe Biden Wins -Goldman Sachs
Goldman Sachs, one of the world’s largest investment banks, has said Joe Biden win could boost global oil prices despite weak global economic outlook and COVID-19 negative impacts on the world’s growth.
The investment bank, however, remains bullish on both oil and gas prices regardless of the election outcome in November.
The bank sees oil and gas demand rising enough in 2021 to supersede election results but explained that Biden win could bolster prices by making production more expensive and more regulated for producers in the U.S.
In a note written by the bank’s commodities team on Sunday, it said “We do not expect the upcoming U.S. elections to derail our bullish forecasts for oil and gas prices, with a Blue Wave likely to be in fact a positive catalyst.”
“Headwinds to U.S. oil and gas production would rise further under a Joe Biden administration, even if the candidate has struck a centrist tone.”
Goldman Sachs explained that if incumbent, Trump, is re-elected with pro-oil and gas policies in place that “its impact would likely remain modest at best,” Goldman’s analysts wrote, “given the more powerful shift in investor focus to incorporate ESG metrics and the associated corporate capex re-allocation away from fossil fuels.”
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