The global oil glut will last through next year as surging demand and faltering supply growth fail to clear the surplus, according to the International Energy Agency.
Record inventories will expand further even as consumption climbs by the most in five years in 2015 and supplies outside OPEC contract next year for the first time since 2008, the IEA predicted. Stockpiles won’t be diminished until the fourth quarter of 2016, or later if sanctions on Iranian crude are lifted following last month’s nuclear deal, the agency said.
“While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 — suggesting global inventories will pile up further,” the Paris-based adviser to 29 nations said in its monthly report.
Oil has slumped to a six-year low near $40 a barrel in New York as OPEC members boost output to defend market share, U.S. production withstands lower prices and concerns grow that China’s economy is becoming less stable. Iran reached an agreement with world powers on July 14 that will remove restrictions on its oil sales in return for curbing nuclear development.
The global oversupply will average 1.4 million barrels a day in the second half of this year, straining available storage capacity, before easing to about 850,000 barrels a day in 2016, the IEA estimated. The production surplus in the second quarter was 3 million barrels a day, the highest in 17 years, it said.
The Organization of Petroleum Exporting Countries kept output near a three-year high at 31.79 million barrels a day in July as record Iraqi production helped offset a pullback by Saudi Arabia, according to the report.
Global oil demand in 2015 will grow at more than twice the pace last year as low prices spur consumption in the U.S. and economies recover, the agency said. World consumption will expand by 1.6 million barrels a day this year to average 94.2 million barrels a day.
The IEA raised its estimate for consumption in 2016, projecting growth of 1.4 million barrels a day to total 95.6 million a day. That’s an increase of 400,000 a day from last month’s report.
“The emerging trend shows a clear link between sharply lower prices, accelerating oil demand growth and recuperating economic conditions,” according to the latest report.
Non-OPEC supplies will shrink by 200,000 barrels a day in 2016 to 57.9 million a day, with the U.S. the “hardest hit” among those producers, which also include Canada, Brazil and Russia, the IEA forecast.
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