The world is awash with oil after having built record stockpiles in recent months and slowing demand growth combined with resilient non-OPEC supply could worsen the glut well into next year, the International Energy Agency said on Friday.
“Stockpiles of oil at a record 3 billion barrels are providing world markets with a degree of comfort,” the IEA said in a monthly report, adding brimming stocks offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions, Reuter reported. Oil prices have more than halved in the past 18 months with supply bolstered by US shale oil output and OPEC’s refusal to cede market share.
The IEA said global oil supplies breached 97 million barrels per day in October, up 2.0 million from a year earlier, as non-OPEC output recovered from lower levels in the previous month.
And even though lower oil prices will lead to a decline in US tight oil production next year, it will take months to clear the market’s glut, the IEA said.
“This massive cushion has inflated even as the global oil market adjusts to $50 per barrel. Demand growth has risen to a five-year high of nearly 2 million bpd ... But gains in demand have been outpaced by vigorous production from OPEC and resilient non-OPEC supply - with Russian output at a post-Soviet record and likely to remain robust in 2016 as well,” the IEA said.
The stock overhang that first developed in the US due to soaring production has now spread across developed nations as well as China and India, the agency said.
“This surplus crude provides some relief, with OPEC’s spare production buffer stretched thin as Saudi Arabia, which holds the lion’s share of excess capacity, and its Persian Gulf neighbors pump at near record rates,” it said.
High stocks could protect the market from a supply crunch should there be a lengthy spell of cold temperatures.
Meanwhile, world demand growth is forecast to ease closer to a long-term trend of 1.21 million bpd in 2016 from a very high 1.82 million bpd this year. The IEA raised its forecast for 2016 call on OPEC supply by 200,000 bpd to 31.3 million.
