'Massive glut' blamed for holding back oil prices

Toronto-Dominion Bank economist Dina Cover wrote in a report this week that despite the improved global economic picture, “[the] blow to the crude oil market is going to continue to be felt for some time, as the fundamental picture remains quite weak.”

She noted that while demand from the developing world had returned to healthy growth by the fourth quarter, oil consumption among OECD countries – which still dominate world oil consumption – remains below levels from a year ago.
Over all, global demand at the end of 2009 was up a thin 0.3 per cent from the end of 2008 – but still down 2 per cent from pre-recession levels at the end of 2007.

Meanwhile, supplies have been growing faster than demand. In the fourth quarter, global production was up 1.6 million barrels a day over a year earlier, as Canada, the United States, Brazil and the former Soviet U-nion all stepped up their oil output.

The result, she said, is that the world oil market is “still facing a massive glut.”

Global supplies ended 2009 running 1.3 million barrels a day above demand. Official global oil inventories sat at about 95 days worth of supplies – slightly higher than where they sat a year ago, and about 10 per cent above their five-year average.

Globe and Mail