IEA sees global market awash with oil in 2017 if no OPEC cut

Thu Nov 10, 2016 7:03am EST
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By Amanda Cooper

LONDON (Reuters) - The oil market surplus may run into a third year in 2017 without an output cut from OPEC, while escalating production from exporters around the globe could lead to relentless supply growth, the International Energy Agency said on Thursday.

In its monthly oil market report, the group said global supply rose by 800,000 barrels per day in October to 97.8 million bpd, led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan.

The Paris-based IEA kept its demand growth forecast for 2016 at 1.2 million bpd and expects consumption to increase at the same pace next year, having gradually slowed from a five-year peak of 1.8 million bpd in 2015.

The Organization of the Petroleum Exporting Countries meets at the end of November to discuss a proposed cut in production to a range of 32.5 to 33 million bpd, but discord among members over exemptions and production levels has raised doubt over OPEC's ability to deliver a meaningful reduction.

"Whatever the outcome, the Vienna meeting will have a major impact on the eventual - and oft-postponed - rebalancing of the oil market," the IEA said.

"If no agreement is reached and some individual members continue to expand their production then the market will remain in surplus throughout the year, with little prospect of oil prices rising significantly higher. Indeed, if the supply surplus persists in 2017 there must be some risk of prices falling back."

Oil prices have risen to around $46 a barrel LCOc1 from near 13-year lows in January around $27, but are still 60 percent below where they were in mid-2014, when the extent of the surplus became apparent.

The IEA said it expects non-OPEC production to grow at a rate of 500,000 bpd next year, compared with a 900,000-bpd decline this year, meaning 2017 could see inventories building again if there is no cut from OPEC.   Continued...

A worker at an oil field owned by Bashneft, Bashkortostan, Russia, January 28, 2015.      REUTERS/Sergei Karpukhin/File Photo