Oil Price: Economic Gloom To Persist

Crude Oil stockpiles have grown to a record 3-B bbl because of strong production in OPEC and and non-OPEC producers, this is deepening the price damage.

“Stockpiles of oil at a record 3 billion barrels are providing world markets with a degree of comfort”, the IEA said in a monthly report, adding brimming stocks offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions.

This weak demand, the agency says, would be worsened by oversupply in the world market from both OPEC and non-OPEC countries- a situation that can see a country such as Nigeria, not finding any buyer for its crude oil in the global market.

“But the current forecast is for a mild winter in Europe and the U.S. If it turns out to be true, bulging stock levels will add further pressure and oil market bears may choose not to hibernate”, the IEA said.

Price volatility is traditional with oil in the global market.

Crude Oil has dropped about 40% in the past year as OPEC defends its market share against rivals such as the United States shale Oil industry, which is faltering only gradually despite the price collapse.

OPEC announced in September that Indonesia had requested to rejoin OPEC after a seven-year leave, having become a net oil importer in 2009, although a few analysts were unmoved over the development. There are signs the a few fuel-storage depots in the eastern hemisphere have been filled to capacity, it said. That contrasts with an expansion of 2.4-M BPD in Y 2014 in total non-OPEC output.

OPEC kept unchanged its 2015 and 2016 forecasts for global oil demand, production outside the group, and the amount OPEC will need to pump.

Surplus oil inventories are at the highest level in at least a decade because of increased global production, according to the Organization of Petroleum Exporting Countries. In 2016, demand for OPEC crude is forecast at 30.8 mb/d.

“Record-high output in Russian Federation provides a partial offset”.

Indonesia’s re-entry into OPEC is expected to be formally announced at the December 4 meeting.

“The impact of oil’s steep price plunge on end users is unlikely to be repeated and economic conditions are forecast to remain problematic in countries such as China”, the IEA said.

Production from OPEC’s 12 members slipped by 256,500 barrels a day to 31.38 million a day in October, according to a number of “secondary sources” compiled in the report.