Global Oil Glut Won’t Subside in 2017, Says IEA
OPEC’s efforts to rein in supply are taking longer than expected as U.S. oil producers see rebound
Summer SaidJune 14, 2017 4:00 a.m. ET
Mobile offshore drilling units in Cromarty, U.K. The IEA’s data on high storage levels indicate that there is more oil in the world than can be consumed.
Mobile offshore drilling units in Cromarty, U.K. The IEA’s data on high storage levels indicate that there is more oil in the world than can be consumed. Photo: Chris Ratcliffe/Bloomberg News
By
Summer Said
The global oil glut is here to stay through 2017 as OPEC’s efforts to restrain petroleum production have hit a wall in the U.S., the International Energy Agency said Wednesday.
In its closely watched monthly oil market report, the IEA said the world’s vast levels of stored oil—a proxy for the global oversupply—grew by 18.6 million barrels in April in industrialized nations. Those inventories were 292 million barrels higher than the five-year average, said the IEA, which advises governments on energy trends.
The high storage levels are a sign that there is more oil in the world than can be consumed, helping depress crude prices at levels lower than desired by oil producers in the Organization of the Petroleum Exporting Countries, the 14-nation cartel that controls about 40% of global crude output.
OPEC teamed up with 10 other big producers outside the cartel to cap their production through March 2018 at roughly 1.8 million barrels a day lower than levels in October 2016.
But the IEA said the effort is taking longer than expected, in part because U.S. oil producers have come roaring back to life this year. The IEA said it expects U.S. crude supply to grow by 430,000 barrels a day this year, and will grow by 780,000 barrels a day in 2018.
“Such is the dynamism of this extraordinary, very diverse industry it is possible that growth will be faster,” the IEA said.
OPEC members Libya and Nigeria have also increased production, as allowed under the cartel’s output deal because their oil industries had faced violent disruptions. OPEC crude oil output rose by 29,000 barrels a day in May to 32.08 million barrels a day, the highest level so far this year.
If current trends hold, stored oil will begin dropping this year but it won’t fall to the five-year average—a key goal of OPEC—until March 2018, when the production deal ends.
“We have regularly counseled that patience is required on the part of those looking for the rebalancing of the oil market,” the IEA said.
Saudi Arabia’s energy minister Khalid al-Falih has said that the producer coalition is determined to do “whatever it takes” to achieve the of bringing stock levels back to the five-year average.
“‘Whatever it takes’ might be the mantra, but the current form of ‘whatever’ is not having as quick an impact as expected,” the IEA said.
Despite relatively low oil prices, producers are still pumping healthy amounts of oil, the IEA said.
Total production from producers outside OPEC is expected to grow by 700,000 barrels this year and 1.5 million barrels in 2018, which is slightly more than the expected increase in global demand. Last month alone, global oil supply rose by 585,000 barrels a day as both OPEC and non-OPEC countries produced more.
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