Global oil glut worsening: International Energy Agency

London - Opec is unlikely to cut a deal with other producers to reduce production

 The world will store unwanted oil for most of 2016 as declines in US output take time and Opec (Organisation of the Petroleum Exporting Countries) is unlikely to cut a deal with other producers to reduce ballooning output, the International Energy Agency (IEA) said.
The agency, which coordinates energy policies of industrialised countries, said that while it did not believe oil prices could follow some of the most extreme forecasts and fall to as low as $10 per barrel, it was equally hard to see how they could rise significantly from current levels.
The Paris-based IEA trimmed its forecast for 2016 oil demand growth, which now stands at 1.17 million barrels per day (bpd) following a five-year high of 1.6 million in 2015. It cut its call on Opec crude for 2016 by 100,000bpd to 31.7 million bpd. That figure is much lower than Opec's January output of 32.63 million bpd.
"Persistent speculation about a deal between Opec and leading non-Opec producers to cut output appears to be just that: speculation. It is Opec's business whether or not it makes output cuts either alone or in concert with other producers but the likelihood of coordinated cuts is very low," the IEA said.
West Texas Intermediate for March delivery slipped eight cents, or 0.3 per cent, to $29.61 a barrel on Tuesday at 9.18am on the New York Mercantile Exchange. Brent for April settlement dropped 23 cents, or 0.7 per cent, to $32.65 a barrel on the London-based ICE Futures Europe exchange.
Oil collapsed over the past 18 months to below $30 a barrel from as high as $115 as Opec opened its taps to drive higher-cost producers such as US shale firms out of the market.
Low oil prices have spurred demand but it was not enough to absorb all crude produced. As a result, unwanted oil went into storage, leading to record stockpiles of over three billion barrels.
US shale oil output has started to decline because of low prices and Opec has said it sees the market rebalancing sometime later in 2016 when demand finally meets supply.
But the IEA said supply may still exceed demand throughout the whole of 2016 and added it saw non-Opec output falling by just 0.6 million bpd in 2016.
"The number could be higher of course and many senior international oil company figures have said so but there is a lingering feeling that the big fall-off in production from US shale producers is taking an awful long time to happen. Perhaps resilience still has some way to go," the IEA said.
The agency also said it saw the dollar remaining strong as it benefits from its safe-haven status, meaning more downward pressure on oil prices.
With weaker global oil demand, likely new gains in Iraqi, Iranian and Saudi output, low chances of an Opec deal, resilient US production and a strong dollar - the IEA said the global oil glut was only poised to worsen. It said that even if Opec production remained flat, global stocks would build by two million bpd in the first quarter, followed by a 1.5-million-bpd build in the second quarter.
 

• UAE