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Page added on February 9, 2016

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IEA sees global oil glut worsening

IEA sees global oil glut worsening thumbnail

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.”

 

Reuters



11 Comments on "IEA sees global oil glut worsening"

  1. makati1 on Tue, 9th Feb 2016 5:38 am 

    Cheer leading the failing US oil industry.. “All is well in the ‘exceptional’ country. But the others are hurting.”

  2. Kenz300 on Tue, 9th Feb 2016 9:50 am 

    The sooner we transition away from fossil fuels the better.

    How Is Climate Change Affecting the Philippines?

    http://ecowatch.com/2016/01/22/climate-change-affecting-the-philippines/?utm_source=EcoWatch+List&utm_campaign=da3a287be1-Top_News_1_22_2016&utm_medium=email&utm_term=0_49c7d43dc9-da3a287be1-86023917

  3. shortonoil on Tue, 9th Feb 2016 10:17 am 

    “Low oil prices have spurred global demand but it was not enough to absorb all crude produced.”

    The Etp Model informs us that the general economy will never again be able to utilize all the oil that is produced. Of course, this bodes very badly for the price of oil, and the oil industry. The IEA, and the EIA are still attempting to hold on to the myth that even though the situation is at present precarious – sometime in the future it will improve. They are playing the oil shell game; guess which one the barrel is under now?

    Petroleum production is an energy consuming process that provides product for an energy consuming process. Adding the consumption of both together does not determine the economy’s ability to produce oil. The barrel counting method is just such an adding effort to determine the outlook of the petroleum situation. The situation is actually decided by the ratio of the the two consuming processes. That ratio ultimately controls the quantity produced, and its price. Its units are consumed energy units/production energy units. When that ratio reaches 1:1 production is maximized, and the price begins to fall.

    The Etp Model gives a means to compute the consumption energy vs. production energy ratio. It has now reached 1:1. To survive in the near term the petroleum industry must now prepare itself for the new paradigm it must operate under. That is an entirely different paradigm than the IEA and the EIA are projecting. Embracing what is now an outdated belief is likely to generate many more prematurely devastated producers than is necessary!

    http://www.thehillsgroup.org/

  4. Plantagenet on Tue, 9th Feb 2016 12:00 pm 

    The oil glut will go on a bit longer. Eventually economic growth in China and India will take up the surplus and the oil glut will end.

    CHEERS!

  5. ennui2 on Tue, 9th Feb 2016 1:25 pm 

    Listen to Planty. We’re still in a GLUT. DEAL WITH IT!

  6. twocats on Tue, 9th Feb 2016 1:40 pm 

    But you talk about the Glut as if we are living in a vacuum tube. What about the demand side? What about the causes the spurred the supply side? What about the fallout from the spurring of the supply side?

    If you’re not robots or trolls certainly you’d have to admit that the glut has a lot of caveats other than “we’re drowning in lots of oil”. If you can’t admit that, than you’re a robot and I’m the fucked up one for talking to a robot. Or you are a troll and I’m an idiot because I’m the only one in the conversation not getting paid. I suggest you use the phrase Glut* and then it can be clear you understand that, yes there is a glut, but that its also more complicated than just that. And yes, I believe there is a Glut*(tm).

  7. shortonoil on Tue, 9th Feb 2016 1:59 pm 

    “I believe there is a Glut*(tm)”

    Glut is a meme; it does not convey any real, useable information. Its purpose is to produce an emotional response that will curtail any further discussion.

    Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut, Glut, glut

    Now, how much more do you know than when you started?

  8. Davy on Wed, 10th Feb 2016 6:40 am 

    “BP CEO `Very Bearish’ on Oil as Storage Tanks Are Filling Up”
    http://www.bloomberg.com/news/articles/2016-02-10/bp-ceo-very-bearish-on-oil-as-storage-tanks-are-filling-up

    “BP is planning for oil prices to stay low for the first six months of the year and expects surplus production to only start diminishing when storage tanks fill up in the second half. “We are very bearish for the first half of the year,” Chief Executive Officer Robert Dudley said at the IP Week conference in London Wednesday. “In the second half, every tank and swimming pool in the world is going to fill and fundamentals are going to kick in. The market will start balancing in the second half of this year.”

    “Global oil supply exceeds demand by as much as 1.7 million barrels a day, Igor Sechin, CEO of Russia’s largest producer Rosneft OJSC, said at the conference. The imbalance will probably ease by the end of this year and potentially become a supply shortfall of 700,000 barrels a day by the end of 2017, he said. BP expects to see “a faster tightening” than Rosneft, Dudley said.”

  9. twocats on Wed, 10th Feb 2016 9:51 am 

    Really!? Really?! Every swimming pool? First they don’t even use swimming pools to store oil, second they wouldn’t let them “fill” as that would be dangerous and icky. third, there’s always a tank open somewhere in the world. fourth, they can just build more tanks.

    you’re welcome boat (and rock), now you don’t have to respond to Davy’s post!

  10. Boat on Wed, 10th Feb 2016 12:26 pm 

    We get various reports on how fast the glut growing. The parameters seem to be 1-1.7 mbpd. The current projection of cut oil production seems to be 600,000 bpd.
    This is all before Iran’s additions. The numbers just do not add up. That 600,000 in cuts needs to be closer to 2 mbpd before one drop comes out of storage.
    Then maybe demand could absorb Iran’s continued growth. The question is-how low will oil go to drop production further.

  11. Apneaman on Wed, 10th Feb 2016 12:39 pm 

    Cancer is just a glut of malignant cells.

    That kills ya.

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