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Oil markets to remain oversupplied: IEA forecast
Posted On Dec 21 2015
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Opec as a whole pumped more oil in November than in any month since 2008 despite forecasting little demand growth for crude next year in a bid to defend market share.
The January West Texas Intermediate benchmark shed 40 cents, or 1.1%, to settle at $36.76 per barrel.
The price of Brent Crude fell 5.3% to 40.73 dollars a barrel.
Production in Saudi Arabia slipped by 25,200 barrels a day to 10.13 million a day in November, OPEC’s report showed.
During the meeting, OPEC members failed to agree an oil production ceiling as Iran pledged to boost its output by one million barrels per day in 2016.
OPEC’s report “fell easily within (the) range of expectations”, Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates, explaining its lack of positive impact. “Oil may plunge to near US$30 (RM128) a barrel”.
Sustained falls in output could help to stabilise the price of oil, although some market forecasters suggest the price could continue to fall to as low as $20 a barrel.
Prices have slumped about nine percent since Friday’s decision by the OPEC oil exporters club not to cut output despite pumping more than its target in the face of a global oversupply and weakness in the world economy.
The other main driving factor for the oversupply has been soaring USA shale production, and this is also affecting the natural gas market.
In its report, OPEC forecast that global oil demand would fall next year, with demand for non-OPEC supply dropping at a steeper rate.
After the “tremendous” growth of 2.23 million barrels per day last year, the group now expects growth this year to have been a “much slower” 1 million – but up from its previous projection of 280,000 barrels. November’s total output is nearly 900,000 barrels a day more than the demand for OPEC crude next year.
The IEA’s forecast follows a string of reports, from the Organization of Petroleum Exporting Countries to the World Bank, saying global economic growth is not enough to take on the surplus of crude oil on the market.
