Global Oil Overhang To Persist Throughout 2016

A faltering global economy, dampening oil demand growth and the return of Iran to international markets ensure that oversupply in global oil markets will persist into 2017. Disarray within Opec means that a unified decision to reduce output remains as distant as ever.

Moreover, both Opec and the IEA have this month revised upwards their forecasts for non-Opec supply growth in 2016. All this means that MEES calculates that 2016 will end with a global oversupply of around 500,000 b/d. Much less than the current 2mn b/d or so, but still a considerable volume.

The IEA’s latest monthly oil market report, released 9 February, has cut its forecast for 2016 global oil demand growth by 30,000 b/d to 1.17mn b/d. What’s more, it cites economic uncertainties in Brazil and Russia in saying that any future revisions to economic growth and hence oil demand, will most likely be downwards. It has also revised upwards its estimate for non-Opec production in 2016 by 60,000 b/d. Although it still expects a hefty drop-off in production of 600,000 b/d, this all means that demand will take longer to catch up with supply.


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