sees global oil glut worsening, OPEC deal unlikely
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[February 09, 2016]
By Dmitry Zhdannikov
LONDON (Reuters) - 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
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.
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"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
(Reporting by Dmitry Zhdannikov; Editing by Dale Hudson and Jason
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