OECD oil stocks will continue growing in 2016, IEA says, oil slips

Futures of Brent and US crude’s West Texas Intermediate struck February 2009 lows for a fourth day in a row in continued fallout from an OPEC meeting last week that abandoned price support measures.

“Non-OPEC growth year-on-year is grinding to a halt, so some of the effects from low oil prices are starting to appear”, said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd.in London.

Oil headed for it’s longest losing streak in nearly nine months on speculation OPEC’s decision to effectively scrap output targets will keep markets oversupplied.

In its monthly report, the IEA warned Friday that global inventories “are set to keep building at least until late 2016”.

In the December report the IEA said that November’s global crude oil supply rose by 50,000 barrels a day compared with October supply and averaged 96.9 million barrels a day.

The group is battling for market share with other oil producers, including the U.S., and last Friday decided against cutting output despite plunging prices, weak global demand and the supply glut.

As a result of low oil prices in oil producing countries and the worldwide companies having no option but to shut down their expensive oil fields, the flow of oil into the global markets will slow down and lead to taking out some surplus crude oil around three million barrels.

Several OPEC members, notably Iran and Iraq, are looking to boost output as they emerge from sanctions and conflicts.

In what the IEA described as an “unrelenting oversupply”, supplies are gushing out at 1.8 million barrels a day (mb/d) more than a year ago.

Brent futures slipped below $US38 a barrel for the first time since December 2008 while WTI fell below $US35 a barrel and is rapidly approaching its GFC low of $US32.40.

Mr Gorry said he expected a slow rebalancing of the market towards the end of next year, with production remaining stubbornly high despite low benchmark prices.

The price of many oil-company shares reflect the assumption that oil will rebound to $65 a barrel, according to Matt Portillo, managing director at investment bank Tudor, Pickering, Holt & Co. Oil rig counts now sit at 545 or the equivalent to levels seen in 2011 when crude prices bounced between $70 and $90.

Gasoline futures recently fell 0.6% to $1.2731 a gallon. Chevron has lost 23 percent this year while Royal Dutch Shell Plc, Europe’s largest oil producer, is down 35 percent and trading near the lowest since July 2009.

“The majority of investors still feel there will be an interest-rate rise next week, and that has always been a detriment to gold, because it strengthens the United States dollar, which is what gold is priced in”, James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview.