Global oil surplus will continue until the end of 2016 - IEA
Global oil surplus will continue until the end of 2016 due to the slow growth of demand and OPEC desire to increase production, according to the monthly overview of the International Energy Agency (IEA).
IEA notes that OPEC decision to keep production at the current level and actually abandon quotas demonstrates a strong commitment to resist the growth of oil production outside the cartel by displacing from the market high-cost producers, even to the detriment of prices.
Since June, OPEC production is at the level of 31.7 million b/d (under previously set quotas of 30 million b/d). However, IEA says, its further production growth is restricted, as the largest producers - Saudi Arabia and Iraq - already keep production at record levels.
OPEC production growth is possible only after Iran return to the market provided the removal of sanctions. This can lead to further growth of oil reserves by 300 million barrels. In general, however, the expected reduction in production outside OPEC and oil demand growth by 1.2 million b/d will lead to lower growth of reserves in oil storages next year.
«The strategy proposed by Saudi Arabia obviously starts working. Lower prices certainly caused damage to oil production outside OPEC, which growth rate fell from 2.2 million b/d at the beginning of the year to 0.3 million b/d», - according to the overview.
In 2016, this figure is expected to fall by 0.6 million b/d by reduction of shale oil production in the United States. In the long-term, this effect will be even greater, as producers curtail investment programs against the background of falling oil prices.
On December 4, OPEC made a decision to keep oil production at the current actual level - about 31.5 million barrels per day. The cartel postponed a decision on a new level of quotas until the next meeting to be held on June 2, 2016 in Vienna, due to the uncertainty regarding Iran.