Oil continues to tumble as Opec announces oversupply

West Texas Intermediate for January delivery was at $36.68 a barrel on the New York Mercantile Exchange, down 8 cents, at 9:24 a.m. Seoul time.

USA crude futures were at $37.43 per barrel at 0631 GMT, up 27 cents from their last settlement, but still not far off this week’s seven-year lows below $37 per barrel.

“Comments from the IEA have… seen both WTI and Brent fall aggressively, after they indicated that the unrelenting supply would see oil prices lower into the new year”, said analyst James Hughes at trading firm GKFX.

Growth will evaporate completely early next year, with non-OPEC supply expected to fall by about 600,000 barrels per day in 2016, largely due to a decline in US shale production.

Between 500,000 and 2 million barrels of crude oil are being produced in excess of demand every day, creating a glut that has pulled down prices by nearly two-thirds since 2014. The trigger was a meeting of oil producers’ cartel Opec late last week, which broke up in disarray as the member countries failed to agree to put a lid on production.

“But OPEC showed last week it’s a paper tiger in that it won’t do anything to prevent supply growth”, said Michael Hewson, chief market strategist at CMC Markets. Production rose to a three-year high in November, the group said in a report yesterday, as surging Iraqi volumes more than offset a pullback by Saudi Arabia.

OPEC’s report follows its acrimonious meeting on Dec 4, where it rolled over a policy of pumping crude without restraint.

The International Energy Agency (IEA) expects oil prices to remain low through 2016, but forecasts a rebound to begin in 2017 as the current oil glut recedes and demand rises.

As a result of the report’s changes to 2016 and 2015 non-OPEC supply forecasts, demand for OPEC crude next year is expected to average 30.84 million bpd – just 20,000 bpd more than OPEC expected previously.

The report also raised non-OPEC production growth estimates by 280,000 bpd to 1 million bpd, based on U.S., U.K., Brazil, Russia, and China production data.