IEA's Forecast | Russell T. Rudy Energy LLC
“Rigzone” reports that in a recent statement the International Energy Agency (IEA) foresees an oil surplus for most of 2016 with excess output going into storage. The Agency anticipates production declines, but not quickly. It also does not think an agreement between OPEC and other producers to curb production is likely.
While the IEA does not believe such dire forecasts as $10 oil, it does not see significant price increases this year. It lowered its OPEC production forecast to 31.7 million barrels per day (bopd), which is significantly below the cartel’s January output of 32.63 million bopd.
The agency observed that lower prices have led to a small increase in global demand, but it is still not enough to offset current production. This has led to record stockpiles of over 3 billion barrels. Granted, U. S. shale output is starting to decline, but only slowly. The IEA sees total non-OPEC output falling this year, but only by 600,000 bopd. The dollar is expected to remain strong as well, which would offset any demand driven price increase.
Global demand increases will likely be offset by new production gains in Iraq, Iran and Saudi Arabia, leading the agency to see a worsening glut as a real possibility.
The statement concludes, “Supply and demand data for the second half of the year suggests more stock building, this time by 0.3 million bpd. If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short-term. In these conditions the short-term risk to the downside has increased.”
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=142947&utm .
