BP sees end in sight for oil glut, but impact will linger

Thu Feb 25, 2016 9:33am EST
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By Barbara Lewis

BRUSSELS (Reuters) - Strong demand should start to cut into an oil glut around the end of this year, even as new Iranian supplies enter the market and doubts persist over whether major oil producers will reduce output, BP's (BP.L: Quote) chief economist said on Wednesday.

But a stock overhang could still linger for at least a year.

Oil LCOc1 prices dropped to their lowest since 2003 last month under the pressure of a supply surplus of around 1 million barrels per day (bpd).

Saudi Oil Minister Ali Al-Naimi has ruled out imminent OPEC production cuts, although he said on Tuesday he was confident more nations would join a pact to freeze output.

Fellow OPEC member, Iran, meanwhile, is eager to increase output after sanctions were lifted.

BP's Spencer Dale said he could not predict what OPEC and other major producers would do and said promised freezes had come from nations unlikely to increase output anyway.

"What is clear, is the oil market is behaving like any market. Prices are falling quite sharply and, as a response, demand is growing quite fast. Last year, global oil demand grew by twice its 10-year average," he said.

Demand growth, although probably not as strong as last year, would continue, he said, while new supplies, especially from U.S. tight oil - around half a million bpd below its peak - contract.   Continued...

File photograph shows a sign is outside BP's North Sea Headquarters in Aberdeen, Scotland January 15, 2015. REUTERS/Russell Cheyne/Files