IEA warns glut will swamp oil market if no OPEC cut

© Lucy Nicholson
The oil market faces another year of a “relentless” growth in oil supply without an OPEC deal to curb output, the International Energy Agency (IEA) has warned. The cartel meets this month to discuss a production freeze.

According to the IEA’s monthly report, global supply rose by 800,000 barrels per day (bpd) in October to 97.8 million bpd. That came on the back of record OPEC output and growing production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan.

“If the supply surplus persists in 2017 there must be some risk of prices falling back,” the IEA said.

The report shows OPEC crude output rose for a fifth consecutive month in October, up by 230,000 barrels a day to a record 33.83 million bpd.

Non-OPEC production is expected to grow at a rate of 500,000 bpd next year, compared with this year’s 900,000 bpd fall. “This means that 2017 could be another year of relentless global supply growth similar to that seen in 2016.”

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The IEA kept its outlook for world oil demand growth this year and next unchanged at 1.2 million bpd, explaining it with sufficiently robust economic activity despite more than two years of lower oil prices.

The agency said OPEC should find a way to agree significant cuts when it meets in Vienna on November 30. OPEC wants to finalize the details of a production cut members agreed in Algiers in late September. The 14-member cartel decided to slash output to a range of 32.5 million to 33 million barrels a day.

According to the IEA, if OPEC countries “do implement their Algiers resolution the resultant production cut will see the market move from surplus to deficit very quickly in 2017, albeit with a considerable stock overhang that will take time to deplete.”

“Whatever the outcome, the Vienna meeting will have a major impact on the eventual - and oft-postponed - re-balancing of the oil market,” the IEA said.