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Page added on August 13, 2015
IEA Sees Oil Glut Persisting Despite Soaring Demand
World oil demand is expanding at its fastest pace in five years thanks to rebounding economic growth and low prices, but global oversupply will last through 2016, the West’s energy watchdog said on Wednesday.
The International Energy Agency said in a monthly report that it was steeply raising its demand growth outlook for this year and 2016, and expected non-OPEC supply growth to decline next year, with U.S. producers hardest hit.
“While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 – suggesting global inventories will pile up further,” the Paris-based IEA said.
The view from the IEA chimes with that of the U.S. government, which on Tuesday lowered U.S. production forecasts, signalling that a 60 percent rout in benchmark prices since last summer may finally be weighing on shale output.
Oil prices have fallen to below $50 per barrel, pressured by an abundance of supply and a strong dollar. The views from the IEA are more bullish than those of OPEC, which on Tuesday raised its forecast of oil supplies from non-member countries.
The IEA said it saw global oil demand rising by 1.6 million barrels per day (bpd) in 2015, up 260,000 bpd from its forecast last month, citing solid economic growth and consumers responding to lower prices.
“That’s the biggest growth spurt in five years and a dramatic uptick on a demand increase of just 0.7 million bpd in 2014,” it said.
It added that persistent macroeconomic strength will support above-trend growth at 1.4 million bpd in 2016, up 410,000 bpd from its previous forecast.
The decline in crude prices has prompted oil companies to cut their investment plans.
“While a drop in costs and efficiency improvements will help to offset some of the spending cuts, output is likely to take a hit soon,” the IEA said.
US Hardest Hit
The IEA said it saw non-OPEC supply growth slowing sharply from a 2014 record of 2.4 million bpd to 1.1 million bpd this year and then contracting by 200,000 in 2016 – with the United States hardest hit.
The prediction signals that OPEC’s strategy of not cutting output, and hurting rival producers instead with lower prices, might be finally working.
However, the strategy, introduced in November last year, has created such global oversupply that it will take another year and a half to absorb the glut.
“Our latest balances show that while the overhang will ease from a staggering 3.0 million bpd in the second quarter of 2015, its highest since 1998, the projected oversupply persists through the first half of 2016,” the IEA said.
Assuming OPEC production continues at around 31.7 million bpd – its recent three-month average – through 2016, the second half of 2015 will see supply exceeding demand by 1.4 million bpd, testing storage limits worldwide, the IEA said.
The surplus will drain down to about 850,000 in 2016, with the final three months of 2016 marking the first quarter of a potential stock draw.
“This outlook does not include potentially higher Iranian output in the case of sanctions being lifted,” the IEA said.
It said a stronger demand outlook and slower non-OPEC growth have raised the call on OPEC crude for 2016 to 30.8 million bpd, 1.4 million bpd higher year-on-year and up 600,000 bpd from the IEA’s forecasts in its previous report.
But the new, higher call on OPEC is still far below the group’s current production volumes, which are holding steady near a three-year high due to robust pumping from Saudi Arabia and record-high Iraqi production.
As a result of huge global oversupply, OECD inventories increased counter-seasonally by 9.9 million barrels to an all-time high of 2.916 billion barrels in June, the IEA said.
Oil prices rose on Wednesday after the IEA’s upbeat report outweighed the bearish impact of a further weakening of China’s currency and disappointing Chinese industrial data, with Brent crude up 18 cents at $49.36 a barrel by 1317 GMT.
44 Comments on "IEA Sees Oil Glut Persisting Despite Soaring Demand"
Davy on Thu, 13th Aug 2015 8:26 pm
It is a schizo world. On the one hand I am hearing how bad growth is then on another hand I am hearing growth is robust.
When the Fed normalizes with the global economy improving because of that normalization then I will bow down and kiss feet.
MrNoItAll on Thu, 13th Aug 2015 9:25 pm
Davy — I like how Economic Undertow describes the oil glut:
“The Undertow story (of the glut) is of an unacknowledged energy shortage leading to exclusion of less-solvent customers from petroleum markets world-wide. Instead of odd-even days or gas lines, fuel is rationed by way of access to credit. As the fuel shortage propagates, the number of solvent customers declines. This is natural and should not need explanation: oil prices fall because customers are broke. There is the illusion of excess supply because the number of solvent customers falls faster than extraction rates. Attempts by drillers to lift more petroleum exaggerates the illusion of excess supply; prices fall which strangles drillers in a vicious cycle.”
What we really have these days is energy shortfalls. As BC mentions in one of his posts today, the energy per capita is decreasing dramatically — more and more people coming online with their “demand” for oil, but not nearly enough oil/energy to meet that growing demand. And a biosphere (waste dump to humans) that can’t take the additional energy usage and resulting waste even if the energy was available.
Here’s the link to that excellent article, in case you haven’t seen it yet:
http://www.economic-undertow.com/
Nony on Fri, 14th Aug 2015 12:16 am
WTI is about 42 now.
Doesn’t hit 45 until the end of 2015.
Doesn’t hit 50 until middle of 2016.
Doesn’t hit 55 until middle of 2017.
Doesn’t hit 60 until end of 2018.
http://www.profitquotes.com/commodities-quotes.mpl?c=QM&contract=NYMEX+miNY+Light+Sweet+Crude+Oil
40-65 is the new normal. POD (hundred dollar prices while volume went up slowly) is dead along with the old PO (peak in 2015 and couple percent declines per year).
MrNoItAll on Fri, 14th Aug 2015 12:32 am
More like 42 now. Sub-40 by the end of 2015. Less and less through next year as waves of businesses go belly up, trillion$ in paper wealth evaporate and jobs of any kind become very difficult to find. Until one day relatively soon, maybe and perhaps even probably next year, we find out that there is no gas for sale anywhere.
Do we have a bet?
What’s going to pull the global economy out of the tail spin it is in right now, Nony? More QE?
Nony on Fri, 14th Aug 2015 12:41 am
It would be a risk free bet for me. I can hedge your bet.
EOY strip shows it at $45. You want to bet at $40. Anything below 40 or above 45 will be a wash for me. Anything in between, I am in the money.
Nony on Fri, 14th Aug 2015 12:45 am
MrNO, I don’t expect the economy to get much better. I think overall will be similar to now. I just expect more demand for oil as people start buying monster trucks again. And I expect less supply from US LTO.
MrNoItAll on Fri, 14th Aug 2015 12:51 am
Steady state economy is what you’re thinking then? Currently plunging commodities hit bottom and stabilize? Food and energy costs level out. Rapidly expanding global population just keeps subdividing whatever small slices of the pie they can get their grubby hands on. Debt stops exponential growth, levels out at the still unpayable hundreds of trillion$, and government collects enough to pay all liabilities plus interest on debt. Conventional wells worldwide stop depleting. Somehow, we stay frozen in time, like in Twilight Zone? Steady state…
Not likely. It either gets better or it gets worse. And the trend is clear.
GregT on Fri, 14th Aug 2015 1:09 am
Thanks MrNo,
The trend is crystal clear, and it is only a matter of time. Nony is living in a complete state of denial, driven by greed. If the stakes weren’t so high he could be considered to be a complete moron, but unfortunately for all of us, the stakes are higher than life as we know it itself. Nony is the epitome of pure evil. The devil incarnate. After everything that he has read here, he should know better, but he still has no morals. Not surprising that he can’t get laid. What female of any species is attracted to a male that doesn’t give a crap about his own offspring? The guy is a complete waste of space. No wonder he’s been banned from so many other sites.
You’re an idiot Nony, and a jerk off. No self respecting female would ever have anything to do with you.
Nony on Fri, 14th Aug 2015 1:16 am
MrNo:
1. The economy can be steady state overall but still have worse/better patches by industry.
2. Supply as well as demand affect oil prices.
3. It takes time for supply to turn off (lag). There’s even some lag for demand (behavior pattern changes, purchase of automobiles, etc.)
4. The economy is not as bad now as it was in 2009. There’s no rule of nature that it can only get worse (or better). Sometimes it rambles around actually.
Nony on Fri, 14th Aug 2015 1:17 am
C’mon Greg. Hook a brotha up with the ladies.
Apneaman on Fri, 14th Aug 2015 1:20 am
Next week they are coming out with subprime loans for groceries.
MrNoItAll on Fri, 14th Aug 2015 1:32 am
“The economy is not as bad now as it was in 2009.”
Worse, much worse. The chickens just haven’t come home to roost, yet. But they will, soon.
The only thing that saved us in 2009 was taxpayer funded bailouts, QE and ZIRP. Those temporary patches have reached the point of severely diminishing returns. There isn’t any bang for the buck left in them. The fracking revolution shot its wad, had its boom. Now it is bust time, big time, and there won’t be another boom. Our resources are all used up while at the same time the global population just keeps growing, placing exponentially increasing demands on exponentially decreasing resources. We are approaching the breaking point, or already beyond it.
But hang on to that blind optimism at all costs, Nony. It becomes you.
GregT on Fri, 14th Aug 2015 1:33 am
“C’mon Greg. Hook a brotha up with the ladies.”
My ‘ladies’ would kick your ass loser. You take first prize as the biggest fucking idiot ever. My wife and my 25 year old daughter agree. Clueless moron you are Nony.
Why do you think that you’ve been banned everywhere else? Because you’re intelligent? You are a total mindless idiot Nony, with a big mouth. You’re not doing yourself any favours. Grow up, or fuck off. Loser.
Davy on Fri, 14th Aug 2015 6:48 am
Demand destruction, dysfunction, abandonment, and the irrational are creeping into all facets of the modern global system. This is because we are likely in a bumpy descent with depletion of foundational resources that cannot be substituted for. A population in overpopulation and overconsumption per what is sustainable and resilient. All of this is being manifested in limits and declining marginal returns to our so called progress. Technology and efficiency is in significant marginal return decline.
This is a simple illustration of a global human system in overshoot to carrying capacity. A finite world cannot go on growing. You can argue details. You can discount theories. You cannot hide what is unfolding. It is plain to see albeit difficult to understand. It is difficult to understand because we have been conditioned and habituated to a way of life. When one calls into question that way of life we have nothing to compare it to. The great depression in some ways but life is so much different now. We are global now with 3 times the population and depleted resources and ecosystems. Climate is destabilized with resulting abnormal climate events.
We are so absorbed with our exceptionalism of progress and development we fail to see technology failing. It is failing with new revolutionary technology. It is failing with its ability to solve new and dangerously potent problems. Technology is causing many of the problems so our blind faith in it is magnifying problems. Our blind faith in economics and technology is preventing us from rationally seeing dangerous imbalances in population, resources, and ecosystem problems. We see these problems but with a false sense of security in technology and economics to solve these issues.
What we need now is humility and acceptance not denial and grandiosity. We need to accept decline and formulate mitigation policies and lifestyle adaptations. We need to find meaning in sacrifice and less consumption. We could be racing into a bottleneck. This overshoot is likely irreversible. It is the product of the self-organization of decades of billions of decisions a second by billions of people.
In crisis we will find change but it may not be the right change. In crisis we will be forced to make decisions. It is unclear whether those decisions will be better or worse. Using the same technology and thinking that got us here to solve the crisis just ahead will almost surely not work. This is going to come down to a situation of overshoot with population, consumption, resources, and waste as a short list of many more. You cannot solve those problems with more. You solve them with less. Growth is more descent is less.
Descent will likely collapse the global system built upon growth. The options we have will occur in a narrow range within a narrow time period. It will be like the movies where the space craft must achieve certain results at certain times to make the window of reentry. One thing seems certain excess deaths over births is likely and essential to species survival. This can be less traumatic or more traumatic but it must happen by the nature of the predicament of overshoot.
A less complex and energy intensive future means more people on the land producing food. Getting from here to there is the really dangerous part. It is likely a time of war and destruction just when we need cooperation and planning. Humans appear to be a species with an evolutionary dead end trait of a large brain with self-consciousness creating the illusion of individuality. This individuality has created a situation of exploitation of our fellow man and the natural commons. Add to that technology and energy intensity and you have a destructive species never before seen on this planet.
All this points to our extinction unless we have a spiritual awakening. I am not optimistic. We may have a number of years before the convergence of so many problems creates the crisis to end the status quo and possibly “All”. Yeap, this shows every indication of an “End All”. Enjoy if you are a lucky one not yet in decline and localized collapse.
shortonoil on Fri, 14th Aug 2015 7:18 am
“World oil demand is expanding at its fastest pace in five years thanks to rebounding economic growth and low prices, but global oversupply will last through 2016, the West’s energy watchdog said on Wednesday.”
Apparently they are talking about the contraction in China, the depression in Greece, the collapse of Venezuela, the slow down of GDP growth in Europe, the world wide currency wars, the ongoing holocaust in the Middle East, that half of US college graduates can’t find a job, and richest oil producing country in the world having to borrow money to pay its bills.
These IEA analysts must have just arrived. They are definitely new to the planet!
shortonoil on Fri, 14th Aug 2015 7:47 am
“Demand destruction, dysfunction, abandonment, and the irrational are creeping into all facets of the modern global system.”
As previously mentioned the Etp Model projects that the world will never again be able to consume all the oil that is produced. It now requires more energy to produce petroleum, and its products than is delivered to the economy. The energy balance equation is weighted heavier on the producer side than on the consumer side. One unit of production will never again be able to drive one unit of demand. That is the bases of this graph:
http://www.thehillsgroup.org/depletion2_022.htm
Petroleum accounts directly for 38% of world GDP. As the industry itself contracts so also will the remainder of that economy. The ongoing growth in world inventories is testament to the declining impact that oil is having. The Laws of Physics informs us that situation is not going to be changing. The declining ability of petroleum to power the world is putting it into a deflationary spiral from which there is no escape!
http://www.thehillsgroup.org/
marmico on Fri, 14th Aug 2015 8:49 am
Petroleum accounts directly for 38% of world GDP.
What a crock of shit. You mean that petroleum accounts directly for 38% of world primary energy consumption.
World GDP is an order of magnitude greater than primary energy consumption measured in money terms.
GregT on Fri, 14th Aug 2015 10:55 am
“Petroleum accounts directly for 38% of world GDP.”
And indirectly for the majority of the remaining 62%. Take oil (fossil fuels) out of the equation, and our species goes back to pre-industrial life.
Take climatic stability and a healthy natural biosphere out of the equation, and our species is headed for an unmitigated disaster.
joe on Fri, 14th Aug 2015 11:05 am
That makes total sense marmico because it’s so energy dense, also add in the effect of fractional reserve banking, you can turn the work of x-btu from oil into Y – output because of the multiplier effect of money.
marmico on Fri, 14th Aug 2015 11:13 am
Wow, GreggieT has a number in a post. He is not the typical innumerate word salad prattle asshole. He can subtract, 100-38=62.
Congratulations. Your discombulated brain had a difficult time keeping up with the Perseid meteor shower counts in prepper land earlier in the week. The quart shy of oil is always in that spot. Your point is what?
Petroleum directly accounts for 3.8%, not the crock of shit 38%, of world GDP.
shortonoil on Fri, 14th Aug 2015 11:18 am
“What a crock of shit.”
Someone flunked high school physics; maybe twice. Nothing moves without energy; when nothing is moving there is no economy. 38% of the world’s economy is powered by oil, it is the energy source that moves stuff around. Without it, 38% of the world’s economy would immediately disappear. Oil accounts for 38% of the world’s GDP.
Someone also flunked reading comprehension, maybe twice?
I really feel sorry for the poor teachers who tried to pound something into that big bone sitting on the top of your head that you call a brain!
GregT on Fri, 14th Aug 2015 11:37 am
Someone also doesn’t understand where money comes from.
GregT on Fri, 14th Aug 2015 11:46 am
Missed the meteor showers Nony. I was at a salmon fishing resort on the west coast of BC, and it was pouring rain. Maybe next year.
marmico on Fri, 14th Aug 2015 11:53 am
In the first six months of 2015, U.S. households spent 4% [3.8%], not 40% [38%], of their “cash” wages (GDP proxy) powering their private vehicles with petroleum.
https://research.stlouisfed.org/fred2/graph/?g=1D8F
You are an effing moron.
GregT on Fri, 14th Aug 2015 12:10 pm
Are you really this much of a simpleton marmi? Or are you just trying your best to be annoying?
marmico on Fri, 14th Aug 2015 12:23 pm
GreggieT, I remember sleeping on the beach in a bag with a driftwood fire in Tofino in ’74. I was a true moron in those days. Couldn’t figure out the tide let alone the cost of gasoline with the ’73 OPEC supply shock. Needless to say, I got soaked over night with Pacific tidal foam.
Apneaman on Fri, 14th Aug 2015 12:33 pm
That tidal foam is now toxic.
marmico on Fri, 14th Aug 2015 12:43 pm
Well ape, I’m glad that I had a 40+ year headstart. Is it Fukushima radiation or petroleum-based plastic or typical ocean flotsam and jetsam?
I’m a partial Hubbert fan. Not the linearization but the nuclear energy. IMO, it is the way to go as the fossil fuel age winds down this century.
Davy on Fri, 14th Aug 2015 12:59 pm
MY God, Marmi has opened up and showed us innumerate word salad prattle assholes a little bit of what ticks inside that Marmi brain. Marm, you know there is something called friendship. Is this material worth being pissed off and hostile about?
Apneaman on Fri, 14th Aug 2015 1:10 pm
There’s all that marm, but I was referring to the current record breaking Pacific algae bloom. All related to too much ape activity, so what’s the dif eh?
Tumbling Down the Rabbit Hole Toward a Second Great Dying? World Ocean Shows Signs of Coming Extinction.
“And the impacts are visible to anyone who cares to look. In the Pacific Ocean, a climate change related blob of hot water is resulting in mass ocean creature die offs. Low oxygen waters beneath the blob are wrecking large zones of ocean productivity and risking the proliferation of deadly hydrogen sulfide producing bacteria. The largest red tide on record has spun off the hot blob. Covering waters 40 miles wide and 600 feet deep, it has left piles and piles of dead shellfish rotting on beaches across the North American West Coast.”
“The blooms and the related expanding, low oxygen dead zones now range the entire world ocean. And where we see the red, the neon green, the cloudy light blue what we see are the signs of another ocean extinction in the making. An extinction that is likely building faster than at any time in the geological past.”
http://robertscribbler.com/2015/08/13/tumbling-down-the-rabbit-hole-toward-a-second-great-dying-world-oceans-face-is-now-shadowed-with-the-early-warning-signs-of-extinction/#comments
GregT on Fri, 14th Aug 2015 1:24 pm
“Needless to say, I got soaked over night with Pacific tidal foam.”
Backpacked the West Coast Trail from Port Renfrew to Bamfield in ’79. That kind of moronic gets people killed. Natural selection and all that.
BTW marmi, moron doesn’t simply go away. It’s kind of a permanent thing.
BC on Fri, 14th Aug 2015 2:05 pm
“innumerate word salad prattle assholes” = IWSPA.
A new acronym just between friends for us IWSPAs who are also poor spellers (IPSWSPAs) or who can’t type. 😀
BC on Fri, 14th Aug 2015 2:11 pm
Did someone say “glut” but with no sign of plant? Should we mark this as a momentous day to celebrate? 😀
augjohnson on Fri, 14th Aug 2015 4:30 pm
marmico: “In the first six months of 2015, U.S. households spent 4% [3.8%], not 40% [38%], of their “cash” wages (GDP proxy) powering their private vehicles with petroleum.”
So NO petroleum is used ANYWHERE but in private vehicles? Nothing in industry, agriculture, etc? Yeah, right! Jeeze…
shortonoil on Fri, 14th Aug 2015 5:14 pm
“So NO petroleum is used ANYWHERE but in private vehicles? Nothing in industry, agriculture, etc? Yeah, right! Jeeze… “
Marm likes to pull a couple of numbers off of last week’s lottery ticket, and build an entire world view around it. They keep him around because he makes everyone else look like genius.
marmico on Fri, 14th Aug 2015 8:20 pm
Back of the envelope, the U.S. consumes 20 million barrels per day. Regular gasoline is $2.65/gallon or $110 per barrel. Assume all petroleum products are priced the same as gasoline.
$110 per barrel times 20 million barrels per day equals $220 million per day times 365 days equals $800 billion per year divided by $18 trillion economy equals 4.4% of the economy.
Yeah, right! The quart shy of oil is a moron and apparently you taught him everything he knows augjohnson.
Kenz300 on Sat, 15th Aug 2015 8:17 am
The demand for electric vehicles continues to grow and nearly every auto maker is producing an electric or hybrid vehicle. It is time to end the oil monopoly on transportation fuels.
augjohnson on Sat, 15th Aug 2015 9:43 am
marmico: “Yeah, right! The quart shy of oil is a moron and apparently you taught him everything he knows augjohnson.”
This is why I pretty much avoid this site since The Oil Drum closed. Total fucking assholes abound and no moderation.
GregT on Sat, 15th Aug 2015 10:55 am
“$110 per barrel times 20 million barrels per day equals $220 million per day times 365 days equals $800 billion per year divided by $18 trillion economy equals 4.4% of the economy.”
Remove those 20 million barrels of oil per day, and not only will your 18 trillion dollar economy completely collapse, the vast majority of it’s citizens will starve to death.
There is only one moron here apparently, and that moron is you marmico. You are doing a mighty fine job of making that point crystal clear.
shortonoil on Sat, 15th Aug 2015 11:05 am
“This is why I pretty much avoid this site since The Oil Drum closed. Total fucking assholes abound and no moderation.”
Things are improving around here; Marm has moved from the back of postage stamps to the back of envelopes. Even though he has gone from a number 2 pencil to a lumber crayon his diatribe against anything that may even smack of intelligence is lessening – somewhat!
After crazy old Marm passes away, which is likely to be any day now, we are all going to go and pour a bottle of good Scotch whiskey on his grave. Some people, reasonably enough, want to strain through their kidneys first.
shortonoil on Sat, 15th Aug 2015 11:20 am
Marm,
If you go the the Dollar Store you can get a whole package of brand new envelopes for a $1.
It really isn’t worth the time to try and erase the old ones first. That may be contributing to the stupid conclusions that you arrive at. After 3 or 4 erasures it gets pretty difficult to read the numbers.
Boat on Sat, 15th Aug 2015 12:54 pm
Actuality marm I filled up at $2.18. Redo the math.
GregT on Sat, 15th Aug 2015 3:21 pm
“Redo the math.”
You mean the arithmetic. Like counting the trees in front of you, while ignoring the millions of hectares of forest behind them.
marmico on Sun, 16th Aug 2015 9:18 am
If you go the the Dollar Store you can get a whole package of brand new envelopes for a $1.
If you went to the Five and Dime Store 100 years ago you could have purchased a whole package of brand new envelopes for a nickel. That may be contributing to your effing moron bullshit.
Actuality [sic] marm I filled up at $2.18. Redo the math.
Meanwhile, someone filled up in Chicago for $3.05 and someone else in LA for $3.44. Gas Buddy reported $2.65 average on August 14. The point being that the quart shy of oil is an order of magnitude effing moron flogging his $59.99 bullshit everyday.