MARKET & ECONOMICSOECD oil stocks will continue growing in 2016, IEA says, oil

Oil prices extended their freefall on Friday, flirting with 11-year lows, after the International Energy Agency (IEA) warned that global oversupply of crude could worsen next year.

Non-OPEC supply is forecast to contract by 600,000 per day next year as US shale, the driver of non-OPEC growth, shifts into contraction, it said.

Opec is displaying hardened resolve to maintain sales volumes even as prices fall in an oversupplied market, the IEA said in its monthly report. In November, OPEC production rose by 230,000 barrels per day from the previous month to an average of 31.70 million barrels per day, according to OPEC monthly oil market report released Thursday.

The IEA said OPEC’s decision last week to impose no ceiling on its output appeared to signal a renewed determination to maximise low-priced OPEC supply and drive out high-cost non-OPEC production regardless of price.

Oil has collapsed by more than 10 percent since the 13-nation Organization of the Petroleum Exporting Countries decided against cutting output despite plunging prices, weak global demand and the stubborn supply glut. “We will not see support until we hit the lows of 2008”.

Brent crude was set for its biggest weekly percentage drop in over a year and US crude was set for its biggest percentage decline in roughly a year.

The November production is about 900,000 bpd more than Opec’s estimated demand for crude next year.

The accumulation of the surplus will actually slow next year to about half the pace observed in 2015 as non-OPEC supply wilts and demand remains strong enough to absorb some of the excess. In 2008, Brent fell as low as $36.20 per barrel.

Members met against a backdrop of uncertainty over the impact of significant Iranian volumes returning to the market if sanctions against Tehran are lifted.

“Storage levels may provide yet another check on reality”, the IEA said.

While Novak did not take part in that OPEC meeting in Vienna, Russia is expected to take part in the next expert-level meeting between OPEC and some non-OPEC producers on global oil markets on Tuesday.

The expected result from growing demand and a decrease in capital investments will be a significant rebound in crude prices.

“Markets don’t necessarily believe that there will be any cutback in production by any of the OPEC members in the very near term and that is ultimately one of the key reasons why we have seen an 8 percent drop over the last week of so”.

While Saudi Arabia believes to protect market share and to win non-OPEC producers the cartel has to keep pumping crude into market as it predicts the demand for oil will increase in the coming year.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell by more than 0.30% to an intraday low of 97.32.