Market optimism underpinning oil prices this month is probably wrong, the International Energy Agency announced this morning, as its view of the global oversupply of crude worsened.
FuelFix.com reports that even if OPEC kept oil production flat, worldwide crude inventories could climb by 2 million barrels a day in the first quarter and keep increasing by 300,000 barrels a day in the second half of this year, the Paris-based group predicts in its monthly oil-market report.
“With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term,” says the IEA, which advises oil-importing nations.
Commercial stocks in OECD countries increased by 7.6 million barrels in December, rising to 3.01 billion barrels—about 350 million barrels above average.
The 13-member Organization of Petroleum Exporting Countries raised daily output by 280,000 barrels in January as Saudi Arabia, Iran and Iraq bolstered production. The group’s total output was 32.63 million barrels a day. The increase was offset by a decline of a half-million barrels a day outside of OPEC.
Daily global demand growth fell from 2.15 million barrels in the third quarter to 800,000 barrels in the fourth quarter, though the group maintained its growth forecast of 1.2 million barrels in 2016. It also hasn’t changed its view that non-OPEC production will drop by 600,000 barrels this year, led by sharp declines in U.S. shale production.
But the IEA dismissed several popular reasons some investors are betting on a swift oil-price recovery, including speculation OPEC will coordinate a production cut with outside exporters. Chances of that, the IEA says, remain low.
