Home / Financial crisis / World awash with oil as record 3 billion barrels stockpiled — and it’s only getting worse, IEA says

World awash with oil as record 3 billion barrels stockpiled — and it’s only getting worse, IEA says

Oil inventories are growing because supply growth still outpaces demand, the 12-member IEA exporters group said in its monthly report Thursday.

The world is awash with oil having built record stockpiles of almost 3 billion barrels in recent months and slowing demand growth combined with resilient non-OPEC supply could worsen the glut well into next year, the International Energy Agency (IEA) said on Friday.

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This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry.

“Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.”

Oil prices have lost about 40 per cent in the past year as the OPEC defends its market share against rivals such as the U.S. shale industry, which is faltering only gradually despite the price collapse. Oil inventories are growing because supply growth still outpaces demand, the 12-member exporters group said in its monthly report Thursday.

Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline, according to the agency. The pace of gains slowed to 1.6 million barrels a day in the third quarter, from 2.3 million a day in the second, although growth remained “significantly above the historical average.” There are signs the some fuel-storage depots in the eastern hemisphere have been filled to capacity, it said.

Heating Fuel

Stockpiles of diesel, used as heating fuel in Europe in the U.S. northeast, were at a five-year high of about 600 million barrels at the end of August. “This could protect the market from a supply crunch should there be a lengthy spell of cold temperatures,” the IEA said.

Production outside OPEC will fall by 600,000 barrels a day next year, with an equal-sized decline in U.S. shale oil, the IEA said. That contrasts with an expansion of 2.4 million a day in 2014 in total non-OPEC output. The IEA’s 2016 forecast for non-OPEC supply, at 57.7 million barrels a day, is 100,000 barrels a day lower than in last month’s report.

Demand Growth

Faltering non-OPEC supply next year means that the amount of crude needed from OPEC is moving closer to the group’s actual output. About 31.3 million barrels a day will be required from the organization in 2016, 460,000 less than it pumped in October.

Supply from OPEC’s 12 members was little changed last month at 31.76 million barrels a day as declines in Iraq and Kuwait countered gains in Libya, Saudi Arabia and Nigeria, according to the report. Near-record output from the group’s Gulf members means the organization’s spare capacity is “stretched thin,” the IEA said. OPEC ministers will meet on Dec. 4 in Vienna to review their current policy.

Global oil demand will climb by 1.8 million barrels a day this year to 94.6 million amid the strongest growth in India’s consumption in more than a decade, according to the agency. Demand growth will ease next year to 1.2 million barrels a day as the stimulus from cheap fuel fades and China’s economy remains “problematic.”

, with a file from Reuters


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