Soaring output from OPEC member Iraq has been a large contributor to that overhang, with production there doubling over the past decade to around 4.3 million barrels per day, more than enough to meet all of India’s daily demand.
At the last OPEC conference held on 4 December in Vienna, the producer group omitted to announce a ceiling on its production levels, sending the futures markets spiralling downward with Brent trading below $40/bbl for the first time since February 2009.
“There is evidence the Saudi-led strategy is starting to work”, the IEA said, referring to the producer group’s decision to maintain high output to safeguard market share.
The International Energy Agency (IEA) has predicted that oil markets will remain oversupplied at least until the end of 2016 in the light of sluggish demand and OPEC’s failure to curb production.
Supply rose by 230,000 bpd in November to 31.70 million bpd, said the report, citing secondary sources. “There is unlikely to be any kind of “happy ending” for oil prices this year”.
Oil prices are off dramatically since OPEC’s meeting last week, with Brent losing more than 8 percent. Demand growth peaked at 2.2 million barrels a day in the third quarter, but there are preliminary signs that it has eased to 1.3 million barrels a day.
Thursday at the close, WTI yields 40 cents to 36.76 dollars on the New York Mercantile Exchange (Nymex).
“The move appears to signal a renewed determination to maximize low-priced OPEC supply and drive out high-cost non-OPEC production – regardless of price”, the IEA said.
Non-OPEC oil supply is estimated to grow by 1.00 mb/d in 2015 to average 57.51 mb/d.
OPEC said that process should speed up, notably due to the sharp fall in oil prices.
Oil gave up most of its early gains on Thursday to trade around US$40 per barrel as persistent oversupply concerns offset a surprise fall in USA crude inventories after 10 weekly rises. At the start of the year, production from countries outside the cartel was rising by 2.2 million barrels a day.