Chika Amanze-Nwachuku with agency report
Energy watchdog, the International Energy Agency (IEA) has predicted an oversupplied oil market next year, despite the recent rollover of an Organisation of Petroleum Exporting Countries, OPEC-led pact designed to restrain any glut.
The energy agency said that oil supply in the first six months of 2019 had exceeded demand by 0.9 million barrels per day.
“This surplus adds to the huge stock builds seen in the second half of 2018 when oil production surged just as demand growth started to falter,” the Paris-based IEA told CNBC on Friday.
Head of the oil industry and markets division at the IEA, Neil Atkinson told CNBC that in addition to the remainder of this year, the outlook for 2020 was also for “considerable oversupply because we are getting big growth from the United States and some other countries.
“So, as far as the issue of re-balancing is concerned, as we say in the lead article in today’s report, re-balancing is still some way off,” Atkinson said.
OPEC and its allies, led by Russia, have kept 1.2 million barrels per day off the market since the start of the year.
OPEC, last week renewed the pact until March 2020 to avoid a build-up of inventories that could hit prices.
“The widely-anticipated decision by OPEC ministers to extend their output agreement to March 2020 provides guidance but it does not change the fundamental outlook of an oversupplied market,” the IEA said.
International benchmark Brent crude traded at around $66.99 yesterday morning, up around 0.7 per cent, while U.S. West Texas Intermediate (WTI) stood at $60.52, around 0.5 per cent higher.
Concerns that global demand was slowing caused Brent to decline by 10 per cent in June, despite supportive geopolitical factors, the IEA said.
The IEA said yesterday that it expects 2.1 million barrels per day expansion of non-OPEC oil supply next year, largely driven by soaring U.S. production. That would mark a slight increase from 2 million barrels per day in 2019, lowering the requirement of OPEC crude.