• 4 minutes US-backed coup in Venezuela not so smooth
  • 7 minutes Why Trump will win the wall fight
  • 11 minutes Oil imports by countries
  • 13 minutes Maduro Asks OPEC For Help Against U.S. Sanctions
  • 10 hours Climate Change: A Summer of Storms and Smog Is Coming
  • 9 hours Tension On The Edge: Pakistan Urges U.N. To Intervene Over Kashmir Tension With India
  • 10 hours The Quick Read On MBS's Tour of Pakistan, India And China
  • 11 hours Iran Starts Gulf War Games, To Test Submarine-Launched Missiles
  • 10 hours BMW to add 2,000 more jobs at Dingolfing plant
  • 9 hours Teens For Climate: Swedish Student Leader Wins EU Pledge To Spend Billions On Climate
  • 12 hours Saudi A to Splash $100 Bln on India
  • 1 day Itt looks like natural gas may be at its lowest price ever.
  • 11 hours Venezuela: Nicolas Maduro closes border with Brazil
  • 5 hours Washington Eyes Crackdown On OPEC
  • 1 day Amazon’s Exit Could Scare Off Tech Companies From New York
  • 20 hours NEW FERUKA REFINERY
  • 7 hours Indian Oil Signs First Annual Deal For U.S. OilIndian Oil Signs First Annual Deal For U.S. Oil
Alt Text

Demand Concerns Drive Oil Markets

WTI crude futures are trading…

Alt Text

Oil Rises Despite Rising Oil, Product Inventories

Oil prices rose on Wednesday…

Alt Text

European Oil Demand Is Shockingly Weak

European demand growth for crude…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

IEA Pours Cold Water On Oil Price Rally

Just as oil prices really started to pick up steam, the IEA had to spoil the party. The Paris-based energy agency said on Tuesday that the oil market will remain in a state of oversupply through the first half of 2017, and in fact, there are some worrying signs for oil prices in the near-term.

The IEA lowered its oil demand forecast once again, dropping demand growth for 2016 to 1.2 million barrels per day. In September it expected growth of 1.3 mb/d, which in turn was down from the 1.4 mb/d estimate in August. Two consecutive months of downgrades to its demand figures come as the agency sees “vanishing OECD growth and a marked deceleration in China.”

The development is all the more surprising because low fuel prices were expected to stoke demand. That did happen in the early phase of the current oil price downturn – in the third quarter of 2015 demand grew at its fastest rate in five years at 2.5 mb/d, as motorists and industry around the world burned through cheap fuel. But demand growth has screeched to a halt, largely due to a slowdown in China. The third quarter of 2016 saw crude oil demand grow at a four-year low of 0.8 mb/d on an annualized basis.

Slowing demand is a major problem for oil prices, particularly because the OPEC-fueled rally may not have a lot more room to run. Oil prices are up roughly 15 percent since OPEC said that it would cut production by 200,000 to 700,000 barrels per day. But the IEA warned that ongoing production gains from other OPEC members could more than offset those cuts. In September, OPEC’s collective output rose to 33.64 mb/d, an all-time record. Iraq added 90,000 barrels per day; Libya added about 70,000 bpd; Nigeria brought back 20,000 bpd; Iran added a modest 30,000 bpd. Much more oil could be forthcoming from some of those nations, particularly Nigeria and Libya, if damaged infrastructure can be repaired and brought back online. Related: Iran, Iraq Bow Out Of Next OPEC Meeting

That comes on top of the near record levels of production from the larger OPEC producers, including Saudi Arabia, the UAE and Kuwait. OPEC is now producing above 33.6 mb/d, which means that in order to lower output even to the higher end of the stated range that OPEC is targeting (33.0 mb/d), the cartel will need to come up with at least 600,000 barrels per day of cuts. Because Libya, Iran and Nigeria are exempt from the planned cuts, the reductions will have to come from elsewhere. Saudi Arabia is the only country with the wherewithal to seriously cutback on output. To be sure, Riyadh was already planning reductions following peak summer demand season, but the steadily rising output levels from fellow OPEC members might test the country’s resolve.

The WSJ reported last week that Saudi Arabia’s powerful Deputy Crown Prince authorized his energy minister to negotiate a production cut with OPEC, but only for volumes that the Kingdom had planned on cutting anyway. In other words, Saudi Arabia was willing to agree to coordinated cuts, but it was not abandoning its strategy of pursuing market share. It was simply repackaging its planned cutbacks as part of an OPEC production cut deal. That suggests that Saudi Arabia may not be willing to cut more than 400,000 barrels per day or so, which would bring it back in line with its spring production levels. But at this point, the Prince does not appear willing to bend any further. Related: Trump And Hillary On Energy: All Noise, No Substance

With OPEC producing at 33.6 mb/d, and the group needing to find at least 600,000 bpd in cuts just to get it to the high end of its announced range, there is good reason for skepticism about members being able to come to terms.

That takes us back to glut of oil that continues to plague the market, as the IEA laid out in its report. OPEC’s “record-smashing performance” this year, combined with much weaker-than-expected demand, points (once again) to a lower-for-longer scenario for crude prices. “Left to its own devices,” the IEA says, the oil market “may remain in oversupply through the first half of next year.” OPEC is trying to correct the imbalances, but it faces an uphill battle in trying to reach a deal that actually produces a substantial impact on global supplies.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News