The International Energy Agency is forecasting a fourth year of surplus in global oil production and rising inventories of unsold crude through 2017, “as demand growth slumps and supply proves resilient,” Bloomberg reports.
The advisory reverses the IEA’s position of just a month ago that global oil markets would return to a balance of supply and demand next year. Instead, Bloomberg writes, “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.” Meanwhile, the usual summer surge in North American gasoline consumption failed to materialize, further suppressing demand.
The IEA’s forecast confirmed other reports linking unexpectedly resilient U.S. shale oil production, and a number of new oilfields coming online in non-OPEC countries, to the producer cartel’s inability to support higher crude prices through production discipline.
Reuters also forecast an increase in U.S. crude inventories, alongside an eleventh straight month of declines in American shale oil production in October. In another report, the same agency noted that the start-up of Kazakhstan’s Kashagan oilfield had prompted OPEC to reverse its previous prediction that non-OPEC production would decline in 2017. OPEC now says non-cartel production will grow by 200,000 barrels per day next year.
Meanwhile, members of the international oil cartel are themselves pumping oil at near-record rates in a desperate scramble for national cash flow, further dimming prospects for a coordinated production cutback that might raise global prices.
“Fundamentally, there’s little support for crude despite its attempts to hold to a bottom of US$45 on empty OPEC talk of production cuts,” Phil Davis, a trader at PSW Investments, told Reuters.
