World oil glut set to worsen, IEA warns

THE WORLD would store unwanted oil for most of this year as declines in US output took time and Opec was unlikely to cut a deal with other producers to reduce ballooning output, the International Energy Agency (IEA) 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 (R162) a barrel, it was equally hard to see how they could rise significantly from current levels.

The IEA trimmed its forecast for this year’s oil demand growth, which now stands at 1.17 million barrels per day (bpd) following a five-year high of 1.6 million last year.

It cut its call on Opec crude for this year 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 co-ordinated cuts is very low,” the IEA said.

Oil prices plunged in the past 18 months to below $30 a barrel from as high as $115 as Opec opened its taps to drive highercost producers such as US shale firms out of the market.

Record stockpiles

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 barrels.

US shale oil output has started to decline because of low prices and Opec has said it saw the market rebalancing sometime later this year when demand finally met supply.

But the IEA said supply might still exceed demand throughout the whole of this year and added it saw nonOpec output falling by just 0.6 million bpd this year.

“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 US shale producers is taking an awful long time to happen.

With weaker global oil demand, likely new gains in Iraqi, Iranian and Saudi output, low chances of an Opec deal, resilient US production and a strong dollar – the IEA said the global oil glut was only poised to worsen. – Reuters EXPORTS of diamonds mined in Botswana fell 38 percent to $2.4 billion (R38.52bn) last year from $3.9bn in 2014, the country’s lowest shipment of gems in six years. Data published by the Bank of Botswana on Monday showed that the value of exports from the major diamond mines in Botswana have not been lower since the 2009 global financial crisis when the exports were worth $1.8bn. The figures do not include diamonds that De Beers brings into Botswana from Canada, South Africa and Namibia for aggregation before re-exportation. The bulk of Botswana’s diamond exports are from Debswana, a joint venture between the government and diamond giant De Beers. – Reuters

ZAMBIA

ZAMBIA’S state-owned power utility reversed an increase in energy tariffs for commercial and industrial customers about two months after it came into effect. The hike was cancelled from Saturday, Zesco said on its website on Monday. A similar tariff increase for households was withdrawn last month. Zambia increased tariffs for mining companies from January 1. The statement did not refer to charges for mining companies. The decision risks further straining Zambia’s budget, which is under pressure from falling copper prices and a severe power shortage. Zesco did not give a reason for its decision, but a public outcry last month prompted President Edgar Lungu to order the energy regulator to reverse the hike for households. – Bloomberg

KENYA

KENYA enacted a new law targeting units of foreign companies that escape remitting most of their domestic taxes by allocating income to tax havens while attributing expenses to the east African nation, a practice known as transfer pricing. The Tax Procedures Act gives the Kenya Revenue Authority (KRA) powers to investigate pricing arrangements between local units of multinationals with their parent companies and overturn any that it deems to have been structured with the intention of avoiding tax. The KRA said yesterday that it was also working with authorities in Uganda, Rwanda and Tanzania to curb illicit trade in taxable goods. – Bloomberg