“Breakneck” growth in global crude oil supply YoY will keep global crude oil inventories piling up through next year, as supply continues to outweigh consumers’ gradual adjustment to a low-oil price landscape, IEA said in its August Oil Market Report.
Global oil supplies are running 2.7mn b/d above year-ago levels despite the collapse in oil prices since the second half of last year, IEA said. OPEC output has hit a three year high at 31.8mn b/d. “Since the Riaydh-led OPEC decision last November to defend market share rather than price, output from the 12 member bropu has soared by 1.4mn b/d and it looks as if there is no backing down,” IEA said.
Non-OPEC supply has dropped back below its 2014 highs in response to lower prices but remained up 1.2mn b/d YoY in July. Even so, IEA expects global supply to exceed demand by 1.4mn b/d through the second half of this year, which will test storage limits worldwide.
Reduced capital spending will help rebalance the oil market in the short term, IEA said, leading to lower future supply growth. But as end-users get adjusted to their increased oil buying power reduced prospective supply could become “increasingly sensitive” if demand continues above trend, as has started to happen this year.