Interesting, new developments are getting into play. The US oil inventory levels are climbing once again - making it 3 out of the last 4 weeks they have done so, the Libyan production is now expected to double within a month, while the global demand for oil is falling and the US oil rig count is continuing to climb - increased productivity appears leveraging rigs far more than in the past. And all this has made most projections go topsy-turvy. Recent estimates are underlining that the global oil demand growth is faltering while oil production is stabilizing, even growing. This is a recipe for the global glut to continue through much of the next year. And so it is. The crude glut is here to stay longer, both the OPEC and the IEA, are now concurring, and, this assertion is in sharp contrast to their earlier projections. The Organization of the Petroleum Exporting Countries surprised the market last week with a report that oil production outside the group was proving more resilient than expected. On the other hand, the IEA's closely watched monthly oil-market report, in its recent issue, marked an abrupt shift for an agency that only a month ago had said the world's oil glut had begun disappearing. Last Monday the OPEC flipped its forecasts, predicting an increase in non-OPEC output, by 200,000 barrels a day next year, as against the drop of 150,000 a day, projected only last month. In its September Monthly Oil Report, the Vienna-based producers' organization said that US, Russia, and Norway will produce 190,000 barrels per day more in 2016 than projected earlier, confirming that the non-OPEC production has remained resilient, despite low market prices. And this meant global supplies outstripping crude demand by about 760,000 barrels a day, making the glut three times higher than projected by the OPEC in August. With the US, adding 77 rigs over the past couple of months, the decline in the US output has slowed down, while the Norwegian output is up 4 percent, contributing to the non-OPEC output hike. And then in 2017, production from outside of the OPEC is expected to surge further, as after years of delay, the giant new oil field in Kazakhstan is set to start producing and the US, shale output seems destined to recover, the report emphasized. Contributing to the continued glut and hindering the rebalancing process is the high global crude stockpile. Despite expectations of depletion in recent weeks, global stockpile continued to be above its five-year average, at 341 million barrels in July. As a consequence of hike in non-OPEC output, OPEC has now cut the call on its crude in 2017 by 500,000 barrels a day to 32.5 million bpd. This is considerably below the current OPEC output. OPEC pumped 33.24 million barrels a day in August, according to external sources compiled by the organization. Meanwhile, the International Energy Agency, the IEA - the OECD energy watchdog - is also now projecting that the glut is set to continue - beyond 2016 - as demand for oil is slowing more quickly that it had previously forecast. In its recent report, the IEA reduced its forecast for demand growth by 100,000 barrels per day for this year, to 1.3 million bpd, and further to 1.2 million bpd next year, while supply is set to rise again next year. The IEA too points out to the growth in non-OPEC output next year. The "non-OPEC supply is expected to return to growth in 2017 (up 380,000 bpd) following an anticipated 840,000 bpd decline this year," the IEA reported. IEA is also wary of the emerging dark clouds on the global economic horizon, underlining that the unexpected gains in Europe have vanished, momentum in the United States has slowed dramatically, while the recent ‘pillars of oil demand growth-China and India-are wobbling.' The IEA said it was now clear that the boost in the second quarter of this year that lifted oil demand growth to 1.4 million bpd over last year has slowed dramatically in the third quarter to just 800,000 bpd. This tapering of demand growth comes despite oil prices remaining below $50 a barrel for much of the year, over 50% below 2014 levels. And this is noteworthy. "The (consumption) stimulus from cheaper fuel is fading," the IEA report pointed out. As a result, the IEA stresses "supply will continue to outpace demand at least through the first half of next year." It hence underlines that global inventories would continue to grow, and "it looks like we may have to wait a while longer," for the markets to balance. This is a dramatic change in IEA's tone and tenor. Until recently it was confident the markets were returning to balance. No more so, it now seems. Only, in April, the IEA had said that the rebalancing of the markets was ‘taking shape.' And then a few days later, IEA Executive Director, and, good, old, friend, Fatih Birol, after meeting Japanese Prime Minister Shinzo Abe, told reporters: "When we look at all the fundamentals - demand, supply and stocks - I have all the reasons to believe that in the absence of a major economic downturn we are going to see balance in the markets latest by 2017." In its Monthly Oil Report for May, the IEA reiterated that the global oil markets were heading towards a long-awaited equilibrium. In its June report too, it repeated the same mantra: Increasing Asian demand and worldwide disruptions to oil production could eat away the glut by the end of 2016. In August too, the IEA predicted that the global oil markets would continue to re-balance this year as a pick-up in demand from refiners had absorbed record output from several Gulf producers. However, sentiments seem to have changed considerably – in recent days. And the fact that the both, the IEA and OPEC had to change their tone so dramatically in recent months - it was not long ago confidently predicting the market would move back into balance - underlines the difficulty in tracking the complexity of the global oil market. This is oil business - slippery as ever. And this also puts OPEC in a quandary. Despite low market prices, non-OPEC production continues to grow, bringing to fore the very question - is OPEC winning this round of battle for market share? The debate is on. The fresh data is also set to intensify the debate within OPEC ranks, when they meet in Algiers later this month, to discuss, argue and debate the possibility of putting a lid on their output. OPEC oil ministers have a difficult task in hand!
