Oil slips as OPEC, IEA data underscores crude glut
LONDON: Oil prices slipped yesterday as the market refocused on a persistent supply overhang that is not expected to abate unless OPEC and other producers cut their output significantly. International Brent crude futures traded at $45.13 per barrel at 1345 GMT, down 70 cents from their last close. US West Texas Intermediate (WTI) futures were down by 84 cents, or almost 2 percent, at $43.82 per barrel.
Crude futures have wiped out gains made since the end of September when the Organization of the Petroleum Exporting Countries said it would agree to cut oil production to shore up persistently low prices. While investors were always skeptical that a deal to cut or freeze oil output levels could be reached at an OPEC meeting on Nov. 30 and then implemented, an increasing amount of data has underscored a global skew towards oversupply.
OPEC reported yesterday an increase in its output to another record high, pointing to an even larger surplus on the market next year. It said it pumped 33.64 million barrels per day (bpd) last month, up 240,000 bpd from September. That means the cartel, beset by geopolitical squabbles amongst some of its 14 member states, would have to cut up to a million bpd if it makes good on its promise to reduce its output to between 32.50 million bpd and 33.0 million bpd. Meanwhile, the International Energy Agency (IEA) said the supply overhang could run into a third year in 2017, should OPEC fail to act. “Oil markets are increasingly reflecting growing consensus that the persistent oversupply seen throughout 2016 will carry on into 2017,” analysts at JBC Energy wrote. “We would actually go a step further, as while 2016 has seen a significant improvement from 2015 with easing oversupplies, 2017 will be worse again barring massive outages or OPEC action.”
In its monthly oil market report, the IEA said global supply rose by 800,000 bpd in October to 97.8 million bpd, led by record OPEC output and rising production from Nonopec members such as Russia, Brazil, Canada and Kazakhstan. Nigeria is working out new oil and gas policies to attract more private investors and boost crude production by 500,000 bpd by 2020, state firm NNPC said on Thursday. The IEA kept its demand growth forecast for 2016 at 1.2 million bpd and expects consumption to increase at the same pace next year, having slowed from a five-year peak of 1.8 million bpd in 2015. OPEC had a similar global demand growth forecast for next year of 1.15 million bpd. Beyond oversupply, a surging dollar following the initial shock of Donald Trump’s US presidential election win also put pressure on prices, traders said. The dollar was on course yesterday for its strongest week in a year.