Oil Prices Near Two-Month Low in Asia

“You can talk all you want about oil demand being better next year and beyond, but right now we have a heck of a glut on our hands that I think has to be priced in a few more”, said John Kilduff, partner at NY energy hedge fund Again Capital.

The increase included a 2.2m barrel jump at Cushing, Oklahoma, delivery point of the USA crude oil benchmark.

“The pace of global stock-building slowed during the third quarter to 1.6 million bpd from 2.3 million bpd in the second quarter, but remained significantly above the historical average”, it said.

There are now more than 3bn barrels of excess supply in world oil markets, according to the worldwide Energy Agency.

Brent North Sea crude for December, the global benchmark for oil, finished at $45.81 a barrel in London, down $1.63 from Tuesday’s settlement.

“We continue to expect the focus of the oil markets to shift to the surplus of refined products, and OPEC highlighted the 210 million barrel inventory overhang in the OECD relative to the five-year average”, it said.

In the months before, oil production in the Gulf of Mexico was highest, which did not allow the production to fall. There are signs a few fuel-storage depots in the Eastern Hemisphere have been filled to capacity, it said. It will eventually reach 103.5 million barrels per day by the year 2040.

The IEA’s 2016 forecast for non-OPEC supply, at 57.7 million bpd, is 100,000 bbl lower than in last month’s report. “United States light tight oil (LTO), the driver of non-OPEC growth, is expected to decline by 0.6mb/d in 2016”.

Analysts have cautioned, however, that record output from Iraq may not rise much further, with low prices and security costs constraining its producers.

“IEA executive director Fatih Birol argues that while a “$50 world” may seem like good news for consumers, a serious energy-security risk is posed by having as much as 75% of world oil production coming from the often-unstable Middle East.

Later this month, 10 tankers of crude oil from Iraq will be delivered to USA ports, as Iraq pumps at its fastest rate since 1962 to compete with OPEC giants like Saudi Arabia. In 2016, demand for OPEC crude is forecast at 30.8 million b/d, about 1.2 million b/d higher than in the current year and unchanged from the previous report.