Oil dives again as IEA sees larger glut

Production from OPEC’s 12 members rose by 50,000 bopd to 31.73 MMbopd in November, the highest in two months, the agency said.

The IEA, an energy monitor, said low prices are taking a toll on supply but producers haven’t yet scaled back enough to make a dent in stockpiles.

Brent crude futures slipped below $38 a barrel for the first time since December 2008, trading down $1.69, or 4%, at $38.04 by 11:47 a.m. EST (1647 GMT) after a session low at $37.93. The EconoTimes content received through this service is the intellectual property of EconoTimes or its third party suppliers.

Oil declined to its lowest level since 2008 as analysts warned that global oversupply will persist into 2016.

In Europe, the “previously beleaguered Italy” posted in October its ninth consecutive month of rising demand for crude oil, year on year, with “strong gains” in the petrochemicals and jet transport markets. Prices along the oil futures curve are now below $60 a barrel all the way through 2024, a sign that a recovery is still far off.

Overnight, crude futures plunged to fresh seven-year lows after OPEC reported on Thursday that it pumped oil at its highest level in more than three years in November, exacerbating longstanding concerns related to the excessive supply glut on global energy markets.

While we may see a decline in non-OPEC production, OPEC still sees an oversupply in the market, expecting a surplus of 860-thousand barrels in 2016.

The IEA, which advises developed nations on energy policies, said the global oil glut was set to worsen in the months to come as additional supplies from Iran – when and if Western sanctions on the country are removed – would push more oil into storage.

Oil production in the USA has also been on the rise and is hovering around its record level. “When we look at 2016, I don’t see many reasons why we can see upward pressure on the prices…”

“Explaining the reason for this sharp slowdown in demand growth, the IEA felt the factors that contributed to a rapid increase in oil use this year are likely to prove temporary”.

“Saudi Arabia and its Gulf allies have the least to gain from supply cuts; they enjoy significant fiscal buffers and risk losing market share to other countries if output is trimmed”, the report from the Dallas Fed added.

The IEA too says the OPEC “move appears to signal a renewed determination to maximize low-priced OPEC supply and drive out high-cost non-OPEC production – regardless of price”.

The Paris-based agency said that global demand growth is forecast to slow to 1.2 million barrels a day in 2016 after surging to 1.8 million barrels a day this year as support from sharply falling oil prices begins to fade. This also tends to weigh on oil demand.