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With Oil in 2017 if no OPEC Cut, IEA sees Global Market Awash


11/10/2016


With Oil in 2017 if no OPEC Cut, IEA sees Global Market Awash
While escalating production from exporters around the globe could lead to relentless supply growth, the International Energy Agency is of the view that the oil market surplus may run into a third year in 2017 without an output cut from OPEC.
 
Led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan, global supply rose by 800,000 barrels per day in October to 97.8 million bpd, the group said in its monthly oil market report.
 
The Paris-based IEA expects consumption to increase at the same pace next year, having gradually slowed from a five-year peak of 1.8 million bpd in 2015 and has kept its demand growth forecast for 2016 at 1.2 million bpd.
 
Discord among members of the Organization of the Petroleum Exporting Countries over exemptions and production levels has raised doubt over OPEC's ability to deliver a meaningful reduction even as the group meets at the end of November to discuss a proposed cut in production to a range of 32.5 to 33 million bpd.
 
"Whatever the outcome, the Vienna meeting will have a major impact on the eventual - and oft-postponed - rebalancing of the oil market," the IEA said.
 
"If no agreement is reached and some individual members continue to expand their production then the market will remain in surplus throughout the year, with little prospect of oil prices rising significantly higher. Indeed, if the supply surplus persists in 2017 there must be some risk of prices falling back."
 
Oil prices are still 60 percent below where they were in mid-2014, when the extent of the surplus became apparent even though they have risen to around $46 a barrel LCOc1 from near 13-year lows in January around $27.
 
2017 could see inventories building again if there is no cut from OPEC as, compared with a 900,000-bpd decline this year, the IEA said it expects non-OPEC production to grow at a rate of 500,000 bpd next year.
 
Supply outpaced demand by as much as 2 million bpd earlier this year and this excess appeared to have all but vanished during the third quarter of 2016.
 
However this reverse is being threatened to be rebalanced as increases in production from non-OPEC rivals such as Russia, Canada and even the North Sea is coupled with the OPEC pumping oil at a record rate of 33.83 million bpd last month.
 
"This means that 2017 could be another year of relentless global supply growth similar to that seen in 2016," the IEA said.
 
Furthermore, overall demand for oil will likely not pick up next year due to slower global economic growth and more modest demand in previous consumption hot spots such as India and China, the IEA said.
 
"There is currently little evidence to suggest that economic activity is sufficiently robust to deliver higher oil demand growth, and any stimulus that might have been provided at the end of 2015 and in the early part of 2016 when crude oil prices fell below $30 a barrel is now in the past," the agency said.
 
(Source:www.reuters.com) 


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