Oil dives again as U.S. stockpiles jump

Oil prices took another dive on Wednesday, moving below $43 USA a barrel after reports that crude oil stockpiles in the U.S. were increasing. Global oil inventory builds in the third quarter of 2015 averaged 1.6 million b/d, down from 2.0 million b/d in the second quarter, which had the highest level of inventory builds since the fourth quarter of 2008.

“Remarks made by representatives of Saudi Arabia and Kuwait do not lead one to expect any change to the current Opec strategy, which aims to defend market shares even if this means putting up with low prices”, Commerzbank said.

USA crude oil prices fell in early Asian trading yesterday after industry data showed an increase in USA stockpiles, while fears that Japan’s economy may have fallen into recession added to demand woes.

The latest outlook from the worldwide Energy Agency shows little sign that the oil supply glut hitting prices and Canada’s oil producers will let up soon.

“The 2015 forecast price is unchanged from last month’s STEO, and the 2016 forecast price is $2 a barrel lower”, EIA said in the report. This could protect the market from a supply crunch should there be a lengthy spell of cold temperatures, the IEA said.

Production outside OPEC will fall by 600,000 barrels a day next year, with an equal-sized decline in USA shale oil, the IEA said. That compares with a projected 1.3 million gain in a Bloomberg survey. But what was tolerable a year ago at $100 a barrel has become less profitable-or unworkable-in today’s world of $50 a barrel crude. That contrasts with an expansion of 2.4 million a day in 2014 in total non-OPEC output. “As the next OPEC meeting on Dec 4 looms closer, speculation over what the cartel will do next will rise”.

This is despite unprecedented declines in investment, with the IEA estimating that yearly demand growth will be well under a million barrels a day until 2020. Economic conditions are expected to remain problematic in countries such as China, and factors that have recently fuelled consumption are expected to fade, it said.