IEA: No OPEC cut means another oil surplus in 2017
* Concern rising in OPEC as producers are increasing supply and demand isn’t growing
* OPEC to meet at end November to discuss production cut
* Demand for oil not likely to pick up next year
The oil market risks running another surplus in 2017 without an output cut from the Organization of the Petroleum Exporting Countries (OPEC), as producers around the globe ramp up supply and demand growth falters, the International Energy Agency said on Thursday.
In its monthly oil market report, the group said global supply rose by 800,000 barrels per day in October to 97.8 million bpd, led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan.
The Paris-based IEA kept its demand growth forecast for 2016 at 1.2m bpd and expects consumption to increase at the same pace next year, having gradually slowed from a five-year peak of 1.8m bpd in 2015.
(OPEC’s job just became tougher with Trump’s win, find out why here)
Time to cut for OPEC and others
OPEC meets at the end of November to discuss a proposed cut in production to a range of 32.5 to 33m bpd, but discord among members over exemptions and production levels has raised doubt over OPEC’s ability to deliver a meaningful reduction.
“Whatever the outcome, the Vienna meeting will have a major impact on the eventual – and oft-postponed – rebalancing of the oil market,” the IEA said.
“If no agreement is reached and some individual members continue to expand their production, then the market will remain in surplus throughout the year, with little prospect of oil prices rising significantly higher. Indeed, if the supply surplus persists in 2017, there must be some risk of prices falling back,” the agency added.
(Oil markets on election day: Read here)
The group said it expects non-OPEC production to grow at a rate of 500,000 bpd next year, compared with a 900,000-bpd decline this year, meaning 2017 could see inventories building again if there is no cut from OPEC.
“This means 2017 could be another year of relentless global supply growth similar to that seen in 2016,” the IEA said.
Furthermore, slower global economic growth and more modest demand in previous consumption hot spots such as India and China mean overall demand for oil will likely not pick up next year, the IEA said.
“There is currently little evidence to suggest that economic activity is sufficiently robust to deliver higher oil demand growth and any stimulus that might have been provided at the end of 2015 and in the early part of 2016 when crude oil prices fell below $30 a barrel is now in the past,” the agency said.