A global glut of oil is forecast to last through 2016 despite the strongest demand growth in five years and faltering supply, both of which have failed to clear the surplus, according to the International Energy Agency (IEA) in its latest monthly report. This has seen jet fuel prices slide more than 47 per cent compared with a year ago, according to the latest statistics from the International Air Transport Association (IATA).
The global oversupply will average 1.4 million barrels a day in the second half of this year, straining available storage capacity, before easing to about 850,000 barrels a day in 2016, the IEA estimated. The production surplus in the second quarter was three million barrels a day, the highest in 17 years, it said.
Record inventories will expand further even as consumption growth doubles in 2015 and supplies outside OPEC contract next year for the first time since 2008, the IEA predicted. Stockpiles won’t be diminished until the fourth quarter of next year, or even later if sanctions on Iranian crude are lifted, the agency added.
“While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 – suggesting global inventories will pile up further,” the Paris-based adviser to 29 countries said in its monthly report.
Oil slumped to a six-year low near US$40 a barrel in New York as OPEC members continue to boost output to defend market share, US production withstands falling prices and concerns grow that China’s economy is becoming less stable. Supply could expand further after Iran reached an agreement with world powers on July 14 that will remove restrictions on its oil sales in return for curbing nuclear development, the IEA said.
Non-OPEC supplies will shrink by 200,000 barrels a day in 2016 to 57.9 million a day, with the US the “hardest hit” among those producers, which also include Canada, Brazil and Russia, the IEA forecast said.