IEA Warns Of New Oil Glut

Authored by Irina Slav via OilPrice.com,

The global oil market could slip into deeper oversupply on the back of non-OPEC production growth led by the United States, the International Energy Agency said in its latest Oil Market Report.

“The main factor,” the IEA said, “is US oil production. In just three months to November, crude output increased by a colossal 846 kb/d, and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader.

Commenting on the recent reversal in oil prices, the authority attributed it to profit-taking and a market correction spanning all industries, adding that oil’s fundamentals supported a decline in prices.

The situation in the United States suggests that history is repeating itself and what we are seeing now is indeed a second shale revolution that could bring petroleum liquids production on par with global demand growth.

But that’s not all. The IEA noted the recent shipment of the first U.S. condensate cargo to the UAE, which although unique might prove to be the start of a new era in international oil trading patterns.

The news is certainly not good for OPEC and, to a lesser extent, Russia, but there is some light at the end of the tunnel: global economic growth could turn out to be stronger than previously expected and this would help offset the impact of growing U.S. production on prices and keep them where they are now.

The authority hinted that the end of the OPEC deal could be in sight given that the overhang in OECD oil inventories has shrunk to just 52 million barrels from 264 million barrels a year ago, but added that the trend in oil prices could convince the cartel to wait.

Separately, the IEA maintained its 2017 oil demand growth estimate at 1.6 million bpd and said this year demand will grow by 1.4 million bpd, a 100,000-bpd upward revision on the January OMR estimate thanks to IMF’s expectations of stronger economic growth this year.

Comments

D503 just the tip Tue, 02/13/2018 - 16:41 Permalink

"Oil glut"

So why are iphones a thousand dollars? I thought the price comes down with "innovation." Make everything cheaper, if fuel is so readily available, watch the "oil glut" disappear. Same with cost per sq foot on housing.

Oh wait.

Maybe we'll see $1/gal at the pump again with such an "oil glut." Roll it back to 2000. 

Then again, maybe saying so, doesn't make it so. 

In reply to by just the tip

Cloud9.5 Tue, 02/13/2018 - 15:10 Permalink

I’m all for it.  I have too much stuff that runs on gasoline for supply constraints to go unnoticed.  There is however a slight of hand going on here.  What we were pumping in 1970 was mostly oil.  That oil supply has been in decline since the 1970’s.  We have now augmented our supplies of oil with kerogen and bitumen which back in the day were not considered to be oil.  Now in the new vernacular, oil is all liquids. It matters little to us end users what it is as long as we get the gasoline we need.   Meanwhile the decline in legacy fields is relentless.

Agent P Tue, 02/13/2018 - 15:11 Permalink

Why isn't that (name withheld to protect the guilty) company that shoots government subsidized battery operated sports cars into space down on this news?  

hardmedicine Tue, 02/13/2018 - 15:12 Permalink

I keep hearing that Big OIl has clean energy technologies that they are suppressing so that all their investments continue to pay off.  I mean, wWTF.

???

i THOUGHT we were in peak oil also? 

The news depresses me. 

When is someone going to jail>

that's all I want to know. 

 

oncemore1 Tue, 02/13/2018 - 15:16 Permalink

I love it, hpw CIA throws next partner, the Saudies under the bus.

This will lead to lower income in SA, less subsidies, and more social upheaval.

Saudi regime will have only one response, namely police force and we get a nice show there, as Saaudi Arabia gradually disintegrates.

desertboy Tue, 02/13/2018 - 15:20 Permalink

"IEA Warns"

WFC?  The IEA has been famously less reliable in its predictions than using a dart-throwing monkey.

It's a matter of record!

But keep pumping that shale bubble.

 

itstippy Tue, 02/13/2018 - 15:22 Permalink

The World's demand for oil is unquechable.  There cannot be an "oil glut" from the consumers' point of view.  Make oil cheaper and we'll buy more of it.  

If you're an oil producer or you've financed oil producers it's a "glut" because the price goes down and you lose money or make less of it.  By calling the current production levels an "oversupply" and a "glut" we see clearly who the International Energy Agency (IEA) represents.  It ain't Tippy.

hanekhw Tue, 02/13/2018 - 15:33 Permalink

It just leapt out of nowhere.......honest. We had NO IDEA we had a glut before yesterday.....honest. All those storage tanks just suddenly appeared from nowhere........

Hubbs Tue, 02/13/2018 - 15:33 Permalink

This story has so many angles to it that I don't know what to believe.

 

First of all, shale oil according to some, has not been profitable and is in fact being supported by a dot-com like injection of investor capital. These shale oil companies are in big-time debt and have to keep pumping like mad just to pay off the interest, even if there is no net profit.

 

Combine this with the fact that these shale oil wells deplete rapidly, some say down  80% after two or three years. Thus, these companies are drilling faster than a stud at a college sorority orgy party...which means that there could suddenly be a huge "kerchunk" after three years due to accelerated depletion, especially if this temporary surplus allows a reflex increase of economic activity for the next few years and spikes short-term demand.

 

Meanwhile, the Saudis may have to keep pumping like mad to support their lavish standard of living. They tried to sell shares in their oil company for an outrageous price that received no bids. This sounds like desperation, and the fact may be that the Saudis are running out of easily accessible, cheap oil. In a few years, they too may hit the wall. Their ability to pump oil may depend on their ability to access adequate water.

 

Then there is the theory that if oil suddenly becomes super expensive, the world economy will tank so badly that the demand will for oil will drop off, and continue to drop off, and that paradoxically, there will be a "surplus" of oil as the economy declines. The lower demand for oil will always be one step ahead of the available yet decreasing supply. A deflationary, not inflationary, feedback cycle. 

Then there is the angle that because of the debt crisis, the world economies tank, decreasing the demand for oil which would provide for prolonged low oil prices, which would aggravate the petroleum companies ability to service their debt.

 

Of course I hear all the arguments about perpetual abiotic oil sources, ANWAR drilling being opened up, new advances in drilling technology etc. to keep the supply of oil cheap and plentiful.

The difference with oil is that to get one barrel of oil out of the ground, you need a barrel of oil to begin with. This is the exception to the traditional economic principles of supply and demand, where it is assumed that there is always a supply of something if you are willing to pay for it. You can't oil out of the ground with loans, debt, fiat, cryptos, or gold. It takes energy.

 

 

Cloud9.5 Hubbs Tue, 02/13/2018 - 16:20 Permalink

Back in the 1970’s when American production hit a wall, a good many smart people thought we were going over a cliff any minute.  Then Alaskan oil and North sea oil came on line and gave us a breather of about 35 years.  Then around 05 we hit another wall and skyrocketing prices made shale oil viable.  We have now surpassed our 1970’s production peak with kerogen replacing legacy production.  I guessing we get 3.5 years out of this run up and then we peak again.

In reply to by Hubbs

abgary1 Tue, 02/13/2018 - 16:27 Permalink

Cheap energy is a key component to a healthy growing world economy.

Now, if we would stop driving up the cost of electricity by wasting on money on re-newables that are financially unviable everyone would benefit even more.

Last of the Mi… Tue, 02/13/2018 - 16:32 Permalink

$2.35 gas here, i'm not foo fucking worried about an oil glut. If the IEA can't maintain and old a designated price on WTI, I sure hate it for 'em. Bullshit globalist control all commodities at any cost article. 

Sapere aude Tue, 02/13/2018 - 16:58 Permalink

Yet more garbage and even more from posters who really believe Peak Oil theory was wrong. IDIOTS ALL OF THEM.

First, Hubbard's theory of Peak Oil is proven. Look at when this Peak Oil theory was made. It was commenting on COMMERCIALLY VIABLE CONVENTIONAL OIL.

That peaked years ago, and the fact we have to go offshore, and some of the most inhospitable places on the planet, along with using sour oil that was NEVER even sold, gives an idea of just how far PAST peak oil in the real sense of the theory we are.

Shale is a Ponzi scheme. Not one of the companies shows a profit on it. They all talk the talk but the accounts show they don't walk the walk.

This has been encouraged by the Fed in the nonsense of US oil self sufficiency....when any idiots can produce something and sell it for half what they pay to produce it! That is not commercially viable oil.

The exports are a convenient way to cook the books and hide the fact that the U.S. is importing millions of barrels a day still and will do for the foreseeable future, so they bluff it out and produce stories about exporting this much or that much...a story borrowed from the Saudis.