Oil glut to persist in 2016 : IEA
13 October 2015
Global oil markets are expected to remain over-supplied next year, with the slowing of demand growth and an expected recovery in Iranian oil exports after the lifting of sanctions, said the International Energy Agency.
While supplies outside OPEC are projected to decline in 2016 in response to lower prices, demand growth will ease from this year's five-year high as the outlook for the world economy remained weak, amid slow uptake of the crude surplus, the IEA projected.
Iran could add to the oversupply if restrictions on its sales were lifted with the completion of a nuclear accord.
Iraq, meanwhile, has replaced the US as the biggest source of new supplies as its output reached record levels.
''The market may be off balance for a while longer,'' the Paris-based adviser to 29 nations said in its monthly report. ''A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels -- should international sanctions be eased -- are likely to keep the market oversupplied through 2016.''
A rally in oil prices in New York last week saw it hit $50 a barrel in New York for the first time since July amid expectations that a slump in US drilling and cutbacks in investment will help ease the global supply glut.
Global benchmark Brent crude was up 40 cents a barrel at $50.26 in the morning today as traders bought back into the market after the contract dropped $2.79 in the previous session.
US crude rose 40 cents at $47.50 after settling down $2.53.
However, according to traders and analysts, the rally might not last.
"We think that prices are likely to remain capped to the upside for the remainder of this quarter in line with our forecast due to weakening product demand, burgeoning crude and product stocks, and limited supply adjustments," Barclays said, Reuters reported.
Going into 2016, ABN Amro said any removal of sanctions against Iran would keep oil lower than average prices in recent years, despite the likelihood of higher demand, a drop in US production and an increased risk premium.
According to the Paris-based IEA, global demand would increase by 1.21 million barrels per day in 2016, down 150,000 bpd from its forecast last month.
"A projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels – should international sanctions be eased – are likely to keep the market oversupplied through 2016," the agency said.
IEA had projected in September global oil demand growth would slow next year to 1.2 million barrels per day (mbpd) from an average 1.4 mbpd this year (See: Global oil demand to slow in 2016: IEA)