• 35 mins Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 hours Schlumberger Warns Of Moderating Investment In North America
  • 3 hours Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 4 hours Energy Regulators Look To Guard Grid From Cyberattacks
  • 5 hours Mexico Says OPEC Has Not Approached It For Deal Extension
  • 7 hours New Video Game Targets Oil Infrastructure
  • 8 hours Shell Restarts Bonny Light Exports
  • 9 hours Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 16 hours Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 21 hours British Utility Companies Brace For Major Reforms
  • 1 day Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 1 day Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 1 day Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 1 day OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 1 day London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 1 day Rosneft Signs $400M Deal With Kurdistan
  • 1 day Kinder Morgan Warns About Trans Mountain Delays
  • 2 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 2 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 2 days Russia, Saudis Team Up To Boost Fracking Tech
  • 2 days Conflicting News Spurs Doubt On Aramco IPO
  • 2 days Exxon Starts Production At New Refinery In Texas
  • 2 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 3 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 3 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 3 days China To Take 5% Of Rosneft’s Output In New Deal
  • 3 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 3 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 3 days VW Fails To Secure Critical Commodity For EVs
  • 3 days Enbridge Pipeline Expansion Finally Approved
  • 3 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 3 days OPEC Oil Deal Compliance Falls To 86%
  • 4 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 4 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 4 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 4 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 4 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 4 days Aramco Says No Plans To Shelve IPO
  • 7 days Trump Passes Iran Nuclear Deal Back to Congress
  • 7 days Texas Shutters More Coal-Fired Plants
Alt Text

The U.S. Shale Play To Watch In 2018

The original U.S. shale gas…

Alt Text

Oil Prices Rise Amid Falling U.S. Rig Count

Oil prices inched higher on…

Alt Text

Are Combustion Engines Reaching Peak Demand?

As countries announce plans to…

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

IEA Claims Oil Will Be Lower For Longer

Rig

Oil prices plunged more than 2 percent on Tuesday after the IEA said that global oil demand is slowing.

In its latest Oil Market Report, the IEA downgraded its assessment for demand in 2016 to just 1.3 million barrels per day (mb/d), or about 100,000 barrels per day lower from its August report. The reasons for slower demand are multiple. Both China and India, which make up the bulk of demand growth, are “wobbling,” the IEA says. Then there are economic worries in other developing countries, which come on top of weak economic performances in Europe. And the “momentum in the US has slowed dramatically.”

Also, refiners are “clearly losing their appetite for more crude oil” as margins have shrunk, the IEA says. Without the robust activity from refiners seen earlier this year, crude demand is set to slow. The 100,000 barrel per day downward revision for the whole of 2016 comes as the IEA sees third quarter demand 300,000 barrels per day lower than its previous forecast.

But the Paris-based energy outfit says the “supply side is equally confounding.” Production continues to expand even as the oil industry has made painful cuts to investment. The U.S. has lost more than 1 mb/d in output from its April 2015 peak, and other non-OPEC producers have also seen declines, including China, and much of Latin America.

Still, OPEC countries have stepped into that void, capturing more market share. Iran, Iraq, and Saudi Arabia have dramatically scale up production. In the past two years, Iran and Saudi Arabia have each added 1 mb/d in additional supply. And Saudi Arabia, Kuwait, the UAE, and Iraq are all near all-time highs, the IEA concludes.

“I think it’s been very interesting the last few months because non-OPEC supplies are actually falling very fast,” Amrita Sen, chief oil analyst at Energy Aspects, told CNBC. But that has been almost entirely offset by higher OPEC production. “Unless and until OPEC production really comes back in, it’s hard to see how we break out of this range. I think $50 to $55, or let’s say $45 to $55, is really the new range now.”

Oil inventories “in OECD countries are swelling to levels never seen before” and in July OECD inventories “smashed through the 3.1 billion barrel wall.” The extraordinary levels of oil sitting in storage will kill off any price rally even when supply and demand do come into balance. And in one glaring projection, the IEA sees global inventories continuing to build through 2017, a sure sign that prices will struggle to gain ground anytime soon. With demand suddenly looking weaker than expected, and supply proving to be more resilient than expected, “it looks like we may have to wait a little longer” for the market to balance, the IEA says. Supply will continue to outpace demand through at least the first half of 2017. Related: Game May Not Be Over For Barnett Shale

OPEC also released its monthly report this week, and it sees the same trends emerging in the oil market. OPEC revised its estimate for non-OPEC supply upwards, seeing gains of 200,000 barrels per day in 2017 compared to a previous forecast for a 150,000 barrel-per-day decline. A big chunk of that could come from the Kashagan project in Kazakhstan, a $50 billion-plus white elephant that has plagued its owners Eni, ExxonMobil, Total, and Shell. The project is a decade behind schedule and vastly over budget, but it could come online in October and add 370,000 barrels per day by next year.

The takeaway message from the IEA report is that there is a new sense of bearishness creeping over the oil market. Prices have been unable to be sustained over $50 per barrel since the downturn began two years ago, and the IEA and other analysts are coming around to the notion that it will take longer than expected before higher prices arrive. The predictions are all the more remarkable because just a month earlier the IEA saw the market balancing as soon as the end of this year.

It wasn’t too long ago that the oil industry started to get used to the “lower for longer” mantra. The IEA is once again trotting out that refrain as market balance remains out of reach.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Victor on September 14 2016 said:
    Given that current production is 96 million barrels per day. A fall to just 1.3 million bpd is indeed rather sharp.
  • Don Clifford on September 16 2016 said:
    Yes, I caught that too. These guys need to proof read there stuff here. The only way 1.3 mbd makes sense is if it's the amount above last years level.

Leave a comment




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