OIL MARKET COULD DROWN
The oil market "could drown in oversupply" as Iran's return offsets production cuts, paving the way for a further slide in prices, the world's leading energy forecaster said on Tuesday.
In a stark assessment of the oil market, the International Energy Agency warned of an oil overhang of at least 1m barrels a day for a third consecutive year in 2016.
"There will be enormous strain on the ability of the oil system to absorb it efficiently," the wealthy nations' energy watchdog said in its closely watched monthly oil market report.
Demand growth is set to moderate this year, while Opec production outweighs supply cuts outside of the producers' group.
If Iran can move quickly to offer its oil under attractive terms, oil prices may come under further pressure, the IEA said, particularly as other Middle East producers refuse to "stay on the sidelines".
In this scenario global oil supply could exceed demand by 1.5m b/d in the first half of 2016, the IEA said.
Oil prices which sunk to new 12-year lows this week — below $28 a barrel — rebounded to $29.61 a barrel.
Now relieved of sanctions linked to its nuclear programme, Iran has vowed to boost output by 500,000 b/d. The IEA estimates about 300,000 b/d of additional crude from the powerful Opec member could be flowing to world markets by March.
"Tehran has done its utmost to ensure the country's oil sector is prepared for higher output," it said.
Opec production — led by Saudi Arabia and Iraq — has already ramped up over the past 12 months. It averaged 32m b/d in 2015, 1m more than 2014.
"Opec has effectively been pumping at will since late 2014, when the group agreed to maintain production in defence of market share," said the IEA.
"This year is likely to see output well beyond 32m b/d from the 13-member group," it added.
An acceleration in Iranian production will offset non-Opec losses this year, the IEA said.
Although still resilient, the IEA said, non-Opec supply is expected to record its first year-over-year fall — of 600,000 b/d in 2016 — since at least 2012.
Global oil supplies expanded by 2.6m b/d year over year in 2015 to 96.3m b/d, the IEA said. Of this, production from outside the Opec producers' group, led by the "stubbornly robust US", grew 1.3m b/d from the prior year to 57.6m b/d.
The IEA upwardly revised US output numbers for the first nine months of last year. Annual gains of 900,000 b/d came despite an almost 70 per cent decline in drilling activity.
Separately, while 2015 saw "one of the highest volume increases in global oil demand this century" the IEA forecasts a slower rate this year.
"The new year has been awash with pessimism about economic growth," the IEA said.
A warmer winter, a stronger dollar and subsidy cuts in producer nations has also weakened the demand outlook.
Demand growth is forecast to moderate from almost 1.7m b/d in 2015 to 1.2m b/d this year.
Global inventories rose by 1bn barrels year over year in 2015 and the IEA forecasts a build of 285m barrels over the course of 2016.
"Despite significant capacity expansions over 2016, this stock build will put storage infrastructure under pressure and could see floating storage become profitable," it added.
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IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.